Is the highest rental offer always the best offer?
The lettings market in 2023 was extraordinary. When it analysed its figures, Rightmove found there had been an average of 20 individual enquiries for every rental property available. For context, only six tenants were chasing each rental in 2019.
This level of competition among tenants was also reflected in the findings of a new survey commissioned by the New Economics Foundation. Of the renters questioned, 40% had ended up paying £100 more per month than the initially advertised rent.
In addition, the survey found 45% of new private renters had to pay more than one month of rent upfront to secure their home, while 21% had seen their rent increase part-way through a tenancy without their agreement.
Unlike selling a property, when the vendor can hold out for the highest offer knowing all of the money will be transferred in one hit, landlords rely on the agreed rent being paid every month.
The finances of tenants are subject to a variety of factors and if the sentiment of the last 12 months is anything to go by, renters may have overcommitted themselves in terms of what they can afford.
An analysis of Google search trends revealed searches for the term ‘rental affordability’ rose by 81.2% between April and August 2023. There was also an increase in people searching the term ‘rent arrears’.
Long-term affordability among tenants will be of vital importance to landlords in 2024 and this is where tenant referencing plays its most crucial part. Prudent financial and credit checks help ensure the tenant earns enough to cover the rent on a monthly basis, especially if the offer that’s been accepted exceeds the rent that was advertised.
Referencing will cover aspects such as verifying regular income, ensuring the tenant is in permanent employment, looking into any adverse credit attached to the applicant and uncovering any trends for late bill payments – whether that’s household bills or past rental payments.
Referencing will also scratch a little deeper, if required. Testimonials from past landlords can help build a behavioural picture, revealing if the tenant took good care of a property, ever sub-let the dwelling or was anti-social. It may also be pertinent to talk to the applicant’s employer for a greater understanding of their financial circumstances and future prospects.
As letting agents, we also undertake the legally-required Right to Rent checks, reference any guarantors and request proof of funds if a prospective tenant offers to pay a large chunk of the rent upfront in order to secure the property.
As we head towards 2024, there is good news for tenants and landlords on matters of affordability. UK inflation dipped to 3.9% – a lower-than-expected figure, thanks to cheaper food and lower fuel prices. As a result of the sharp drop, financial experts are beginning to predict the Bank of England may start cutting the interest rate in May 2024.
Additionally, the UK’s energy price cap is predicted to fall by 14% in April, according to Cornwall Insight, lowering household bills. A typical dual fuel bill should decrease from £1,928 in January 2024 to £1,660 a year in April and to £1,590 in July.
If you would like to talk over matters of rent, affordability and payments, feel free to contact the team for advice.
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