The Private Rented Report from The Mortgage Works (TMW) said that while the majority of rented stock was owned outright, for the 40% mortgaged properties the “significant rise in interest rates since late 2021” was a “major challenge”. TMW said this was particularly true as most buy-to-let mortgages were on an interest-only basis. 

In 2023, 0.95% of outstanding buy-to-let mortgages were in arrears of three months or more, higher than the 0.76% proportion among homeowners. 

TMW said it was “reassuring” that this remained low by historic standards. 

The lender put this down to landlords being on longer term fixes for five years, allowing them to adjust to the environment, as well as having mortgages at 75 loan to value (LTV) which relatively shielded them from higher interest rates. 

It also said strong rental growth offered landlords some relief. 

Sponsored

The changing role of the Bank of Mum and Dad

Sponsored by Aldermore

 

Shift in renter type 

TMW said there had been a “dramatic shift” in the number of people renting aged between 55 and 64, with an 80% rise in private rentals within this group over the last decade. 

This coincided with a drop in homeownership rates across this demographic, which is now around 10% lower than its peak in 2007. 

Among people aged 45 to 54, there was a 45% rise in private renters from 2013 to 2023, while the number of renters aged 65 and older increased by 46%. 

Over the same time period, the report also showed a 4% fall in private renters aged 25 to 34. 

There has also been a change in how landlords invest in the market, with 43% holding just one rental property in 2021 compared to nearly 80% in 2010. 

The share of landlords with five or more properties also rose from 5% in 2010 to 185 in 2021. TMW said these landlords had a “disproportionate role” in the private rental sector as they accounted for nearly half of all tenancies. 

By 2021, just over half of landlords had been in the market for 11 or more years, and less than a tenth were recent entrants who had been in the sector for three years or less. 

 

A stable private rental market 

TMW’s report found that the share of rented households in England had stayed broadly stable at around 19% in recent years, following rapid growth between 2000 and 2015 which was fueled by lower interest rates. 

There were around 4.6 million households in the private rental sector (PRS) by 2023, just below the 2017 peak of 4.7 million. 

TMW said the outlook of the PRS was “particularly difficult to discern at present”, noting that tenant demand and rental growth were both strong. Also, with housing affordability under pressure, potential homeowners were more likely to stay in rented accommodation for longer. 

Damian Thompson, director of landlord at TMW, said: “Understanding the dynamics of the private rented sector has never been so important. The sector continues to support the lives of millions of people across the UK by providing homes for those who either can’t afford to buy or prefer not to own a home. 

“We look forward to understanding the new government’s plans to create a stronger, fairer private rented sector, where legislation works for both landlords and tenants. 

“TMW report provides in-depth market analysis that will help identify trends and the critical areas we must collectively address if we are to make a difference.”