UK Demand For Rental Properties is Set to Remain Strong as Mortgage Terms Lengthen

Recent analysis and a survey conducted by consultancy firm Hargreaves Lansdown indicate that rental demand is expected to remain high in the long term as an increasing number of individuals resist the idea of lengthening mortgage terms.

The study, which involved polling 2,000 individuals, revealed that over one in six respondents anticipate being over the age of 65 by the time they fully repay their mortgages. Furthermore, one in 10 respondents expect to be over 70 years old or believe they will never be able to fully pay off their mortgages.

Among those aged 55 and above who still have outstanding mortgages, one in five individuals expect to continue making repayments beyond the age of 70, while seven percent believe they will never be able to clear their mortgage debt.

Interestingly, the research found that 80 percent of retired individuals are outright homeowners, meaning they have paid off their mortgages entirely, while six percent still have ongoing mortgage obligations.

The rising mortgage rates are likely to force more people to extend the duration of their mortgage into their later years, or alternatively, to remain in rental properties for an extended period, or even for the remainder of their lives if saving for deposits continues to present challenges.

Sarah Coles, the head of personal finance at Hargreaves Lansdown, highlighted the impact of higher mortgage rates, which have caused the average two-year fixed-rate deal to rise to approximately 6.2 percent according to Moneyfacts. This increase has created challenges for hundreds of thousands of individuals seeking to remortgage their properties.

To address this issue, lenders have collaborated with the government to facilitate temporary extensions of mortgage terms without conducting affordability checks. Although this measure is designed to allow for short-term adjustments to mortgage terms, there is a possibility that individuals taking advantage of this option may end up with a more permanent change to make monthly payments more manageable.

Coles also pointed out that the average cost of a home now stands at £286,000, necessitating a significantly longer period to save for a deposit. Consequently, the average age of first-time homebuyers has reached 30 years old. Additionally, the fact that first-time buyers are borrowing a greater multiple of their income means that repayment periods are stretched over longer durations.

These insights shed light on the evolving landscape of the housing market, emphasizing the enduring strength of the rental sector as mortgage terms lengthen. It's essential for investors to consider these trends and adapt their strategies accordingly to capitalize on the growing rental demand.

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