Interest rates continue to rise in the UK with a further increase of 0.25% on 3 August 2023 taking the rate to 5.25%. This will have a greater impact on home owners and landlords alike who are have mortgaged properties and are not in a fixed term or coming close to the end of a fixed term. A further interest rate rise is expected by the markets in September with rates not expected to fall until well in to 2024.
While there is an immediate impact on many mortgage holders, there aren’t many short-term fixes with the current situation expected to continue for quite some time. Interest rate are being hiked by the Bank of England in an attempt to curb inflation
Government Action - Is It Really Working?
However, whilst these steps may have helped in times where the general public had plenty of disposable income and spending power, purchasing more expensive items, this isn’t the case today. Many people are on the breadline with more being dragged in to the poverty trap with a risk of losing their property or falling in to serious debt. Interest rates are unlikely to curb spending where a large majority have already cut as much as they can in any event. While some may be able to tighten their belts a little more, this would have the effect of pushing others in to more desperate levels.
What is strange is that the government claim that increasing wages for public sector workers, nurses, doctors, teachers and others will drive up inflation. However, many economists believe that this isn’t the case as there would not be pressure on the ‘businesses’ to increase costs to their ‘customers’ as these services are free at the point of use. The government then argue that increasing interest rates is the best tool to curb inflation. However, this increases costs not only for the general public but also most businesses who also have to cover increased costs of energy and other essentials. These costs need to be covered which will push up inflation.
The government’s case in regards to inflation makes little sense when you take everything in to account. Whilst inflation is highly likely to fall considerably over the next 6 months or so, and the government will claim success with the action they have taken, it is likely inflation would have fallen in any event as the rapid increases in energy, fuel and food prices from the previous 12 months, fall out of the equation.
Anyway, I digress but feel it is necessary to address such matters and wonder why those making these decisions, which ultimately reduce the standard of living for the majority of us, are not held more to account. All that said, most of us don’t have control of government policy so we need to work within the system and take steps to improve things for ourselves.
So what can we do?
Rent a Room
Homeowners, with or without a mortgage, could consider renting a room in their own home to cover the increased mortgage payments and help with other cost of living increases or simply to provide more disposable income. There are also no tax implications with rent payments under £7,500.00 per year when renting out one furnished room in your own home. This can be done under the Governments’ Rent a Room Scheme.
Landlords Increase Rent
Landlords may choose to increase rents for various reasons, and changes in interest rates could be one factor influencing that decision. If a landlord has a mortgage on the property they're renting out, an increase in interest rates could lead to higher monthly mortgage payments. To offset this additional expense, they may consider raising the rent to help cover the costs.
However, rent increases are also influenced by other factors, such as local rental market conditions, property maintenance costs, property taxes, demand and the overall economy. Landlords need to strike a balance between staying competitive in the rental market and covering their costs.
It's worth noting that rent control or tenant protection laws in some areas may limit how much and how often landlords can increase rents. In many cases there is a limit on how far a landlord can go in terms of rent rises so you should carry out your own research and seek expert advice.
If you have a room to rent or considering renting a room in your own home, please Register as a Landlord and begin adding your room now.
Tenants
If you are a tenant concerned about rent increases, it's a good idea to be aware of your rights and any regulations that may apply. Of course, a landlord increasing rent to help cover costs, will have the opposite effect on tenants who may already be in serious financial difficulty.
Assuming a landlord has the legitimate right to increase rent and, in doing so, the only option to the tenant may be to accept the increase or give notice to vacate and try to source other accommodation. This is very difficult in itself with available stock in short supply and rents rising elsewhere which my make matters worse.
We would always encourage Landlords and Tenants to discuss the situation and for the tenant to air their concerns where possible. This way, an amicable solution could be reached. This could be a compromise on the amount of increase, a staggered increase over a few months or other solution.
One of the most affordable renting options is a room in a shared property or HMO. Rents usually include bills such as utilities, gas, electric, water, broadband so making the overall cost cheaper. It is also easier to manage a budget as you know what your monthly costs will be.
You can search our website or Register as a Tenant to see what rooms we have available.
If you are a tenant and you believe your rent is being increased unfairly or in violation of relevant laws then you should seek legal advice. One step would be to contact the Citizens Advice Bureau (CAB) and give a full explanation of your situation so they can provide advice.
Seeking advice from the CAB is also a good idea if you are suffering from debt whether or not the above steps may help. It is important to take action as soon as you can in order to protect your property and avoid bankruptcy. We can also recommend X-debt a small, friendly debt company who will be more than happy to listen to your concerns.