High rents encourage more tenants to consider buying their own homes

With rental prices continuing to rise due to market conditions, the question of whether this could encourage more tenants to look to the property market is gaining interest.

According to Winkworth Estate Agents, rising rental prices are encouraging more people to explore getting onto the property ladder.

This holds true for Kim Balasubramaniam (pictured), senior mortgage broker at The Mortgage Mum, who has noticed an increase of clients coming to the brokerage from the rental sector.

Why are renters looking to buy?

“I believe the reason for the rise in the number of first-time buyers who are currently renting looking to purchase is twofold,” said Balasubramaniam.

Firstly, Balasubramaniam said, as rents are rising, many customers were reluctant to pay increasing costs when they could be contributing to their own mortgages.

With the cost-of-living crisis, she said an increase in rent could be the impetus some clients needed to start researching the option of home ownership.

“Secondly, as buy-to-let rates have risen in recent months, the numbers do not stack up as well for some amateur or small landlords,” Balasubramaniam suggested.

Balasubramaniam explained that as their returns were diminishing, the property they owned was seen as a less attractive investment.

“Clients are coming to us having been given notice from their landlord, who is selling up, who are either looking to purchase the house they have been renting or searching for a suitable property nearby,” Balasubramaniam added.

Buying more affordable than renting

Often the monthly mortgage payment could be less than the rental for a similar property, so buying seemed more affordable than renting.

However, as good as this might look on paper, Balasubramaniam said it must also be remembered that there were many other costs associated with owning a home, of which clients should be made fully aware.

“Affordability continues to be a challenge so whilst a client may be affording the rent on a property, whether they would actually be able to be approved for a mortgage for the amount needed to purchase is a different question,” she considered.

Balasubramaniam said there were now many first-time buyer schemes entering the market which would play an important role in increasing affordability for these types of clients.

Overall, Balasubramaniam said an increase in buyers was a good thing for the housing market, but added it is also important that the focus wasn’t entirely on residential; that there continued to be a strong investment market.

“The balance between higher buy-to-let rates and inevitable rental increases by landlords is a tricky one, and it remains to be seen how much of an impact this will have in the coming months,”  she commented.

Advice to customers

“As always, all advice and guidance is so personal; what is right for one client might not be right for the next,” Balasubramaniam said.

She did not think there was any blanket guidance for those renting who wished to buy, but she said they must be informed on the process and what they needed to consider financially in terms of saving for a deposit and the myriad of other moving costs.

“Ultimately though, if they can afford it, investing in their own home is often a much wiser financial proposition than paying rent to a landlord,” Balasubramaniam said.

Have you seen a rise in the number of purchase clients coming from the rental market? Let us know in the comment section below.