As the UK government's coronavirus vaccination process continues to impress, the wider effects of the pandemic remain. Among those adverse effects is a drop in household incomes which is limiting many renters plans to exit the lettings market and buy their own home. Recent research shows that while many of the UK's tenants still have aspirations to become home owners around a fifth of those hoping to buy a property have had to rethink their plans due to the pandemic.
The reasons for being unable to buy a property as soon as they had previously planned are varied but all link to the wider effects coronavirus is having on the economy. While this development may support rent levels in some areas, it also ensures there continue to be too few rental homes for the still rising number of Britons who need them.
Combination of Events Delay Aspirations
According to research conducted by mortgage lender Vida, some two-thirds of renters across Britain aspire to become home-owners and are working towards that goal. However, due to the effects of the pandemic, those plans have now been delayed.
The reasons why prospective home-owners are currently unable to move forward with their home-buying plans include:
- Loss of income due to redundancy, furlough or reduced hours/pay due to the Covid-19 pandemic.
- Stricter mortgage lending rules which mean existing savings may no longer be enough for a deposit or job situations currently incompatible with mortgage approval.
- Lower savings available for a deposit after renters have had to dip into them to cover loss of earnings.
- Uncertain job security during the ongoing pandemic.
In addition to the various reasons behind these new delays to renters hopes to buy a home of their own is also the news that its not just something affecting younger tenants; many older renters also plan to own their own home, either for the first time or for the second time in their life after a period of entering the lettings market. Meanwhile, key workers are also among those tenants now reconsidering their home buying plans amid the effects of the pandemic.
Some Hope for Tenants
Although there are a number of details negatively affecting renters’ plans to exit the lettings market and buy their own home, there is also some good news for tenants’ deposit saving plans. Recent data shows that average rents across a number of popular cities in the UK have declined as tenants opt to move from city to more rural areas.
In January 2021, average rents in London were 12.4% lower than they were a year earlier. Rents declined by 10% and 5.3% over the same period in Edinburgh and Manchester, respectively. Meanwhile, average rents also declined in Birmingham (-4.6%) and Leeds (-4.4%) over the same time period.
With potentially lower monthly rents for some tenants who have moved in the past few months, this could help them increase their monthly savings towards a deposit to buy a home. Then, even if they have to wait longer to make that purchase, once things, including mortgage market rules, begin to ‘normalise’ again, then those renters will be well-placed with a healthy deposit to make their hoped-for home purchase.