How inflation and potential interest rate increases could hit the rental market

As we go into winter several market conditions are adding increased pressure on the cost of living and tenants ability to keep up with rental payments. We assess the contributing factors adding to the squeeze on tenants and landlords, as well as measures that landlords can take to shield themselves from the worst of the impact.

Inflation impacting cost of living

Inflation is expected to continue having a big impact on the economy for the foreseeable future, potentially hitting 5% by the end of 2021 according to Huw Pill, the Bank of England's Chief Economist.

Increased energy costs

The cost of energy has already seen a steep increase with about 15 million households facing a 12% rise in energy bills, and there are warnings of further "significant rises" next year. Whether or not paying utility bills is the responsibility of the tenant or owner, the rising costs add greater pressure on the ability to keep up with rent or mortgage payments.

Impact of expected interest rate rises

In response to inflationary pressures, the Bank of England is expected to increase its base rate - currently at 0.1% - in the coming months. If so, this can quickly have a knock-on effect of increasing mortgage rates, putting some landlords in a position where they may need to increase rent to cover the additional cost.

How landlords can shield themselves

Robust tenant referencing

Carrying out robust and thorough tenant referencing is essential in order to protect yourself from risk. Our comprehensive tenant check reports allow you to be confident about who you're renting to, by verifying identity and income and providing a clear affordability risk assessment.

Adding a Rent Guarantee Insurance

By taking out Rent Guarantee Insurance, you can cover up to £2,500 in rental income per month for up to 15 months, while also getting legal expenses cover of up to £100,000 to help with eviction costs.

As the combined costs of missed rental payments and legal expenses can quickly add up to thousands of pounds, and still some uncertainty about the pandemic, having a rent guarantee policy reduces a landlords risk of any lost income.

Learn more about rent guarantee cover here.

Ensuring Standing Order is setup on new tenancies

With our Onboarding product, standing orders for rent payments can be setup easily by the tenant, with a confirmation provided to the agent. Standing orders can help reduce the risk of tenants defaulting by automating the rental payment process.

Read more about the standing orders feature here.

Disclaimer: this blog post is intended for general information purposes and should not be construed as legal advice or official guidance.