Getty Images
A planned drop in loans to landlords could reduce the number of homes available for rent next year.
Mortgage lenders' trade body UK Finance said the outlook was “challenging” for the rental property sector in 2025 due to additional taxes faced by landlords.
This is despite predictions that interest rates and, therefore, mortgage rates are expected to fall over the course of the year.
Tenants have faced intense pressure in recent years due to soaring rents and competition for available properties.
Forecast for 2025
The fall in mortgage rates in the second half of this year has led to a “modest recovery” in the rental housing sector this year after a difficult 2023, according to UK Finance.
But, in its latest annual forecast, it said additional stamp duty on the purchase of additional homes, as well as existing regulations and taxes, would lead to a reduction in activity.
It forecasts a 7% drop in mortgage lending for buy-to-let purchases in 2025 compared to this year.
The National Residential Landlords Association (NRLA) said 31% of landlords are considering selling the properties they rent in the next two years, due to additional cost pressures.
Property portal Zoopla said the average cost of renting was now £1,270 a month, £270 more than at the end of the coronavirus pandemic.
Generation Rent, which lobbies on behalf of tenants, said more relief should be given to tenants facing cost of living pressures.
However, the pace of rent increases has slowed as many reach the affordability threshold.
Options for first-time buyers
The latest forecast could give some hope to people stuck in housing as they look to buy a first home.
Falling mortgage rates and rising wages have improved affordability for those buying a home at the end of this year, and UK Finance expects this to continue until 2025.
He predicts a 10% rise in mortgage lending for home purchases next year, although some analysts have already questioned that forecast, calling it optimistic for lenders.
The latest data shows the average rate for a two-year fixed-rate mortgage is 5.47%, according to financial information service Moneyfacts. The typical rate on a five-year contract is 5.25%.
Nationwide, the UK's largest building society, said stamp duty changes for many buyers in England and Northern Ireland could create a volatile property market in the first half of 2025.
Further, UK Finance said it expected many people to once again struggle to afford to move or buy a new home in 2026.
How to secure a rental property
Agents say there are simple ways to make securing a rental property easier:
Start your research well before a rental ends and register with multiple agents. Have pay slips, an employment reference and a reference from a previous landlord handy. Build a relationship with agents in the area, but be prepared to broaden your search. Be sure of your budget and calculate how much. you can propose from the start. Be aware that some agents preview properties on social media before listing them.
You'll find more advice here and help with your rental rights here.
