Falling interest rates have made mortgages cheaper for property buyers, as well as reducing costs for some landlords, easing pressure in the rental market.
The Bank of England (BoE) cut interest rates last week to 4% from 4.25%, marking its fifth cut in a year, as the UK grapples with both persistent inflation and a cooling jobs market.
Interest rates set by the UK central bank influence the borrowing rates applied by lenders, so mortgages costs have also fallen during this cycle of cuts, making buying a property less expensive.
The average rate for a two-year fixed mortgage stood at 4.70% last week, while five-year fixed deals averaged 4.97%, according to data from Uswitch.
Some landlords will also have benefitted from lower mortgage rates, reducing the pressure to pass these costs onto tenants.
Research released by estate agent Hamptons on Monday showed that average private rents on newly-let properties across Great Britain have fallen for the first time in five years. Its data showed that the average rent on a newly-let property fell 0.2% year-on-year in July, marking the first annual decline since August 2020, during the height of the pandemic.
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Greater London recorded the steepest decline, with rents falling 3% year-on-year in July – its seventh consecutive monthly decline and the biggest annual drop since May 2021.
However, the estate agent said that these falls were not yet widespread, as rents were still rising in seven out of 11 regions, with the East Midlands (3.4%), West Midlands (2.7%) and South West (2.6%) leading the way.
In addition, Hamptons said that that rents on renewed tenancies have continued to rise, up by an average 4.5% year-on-year in July.
And the average monthly rent for new lets across Great Britain stands at £1,373, which Hamptons said was £350, or 34%, higher than in August 2020.
Meanwhile, the average rent on a tenancy renewal in Great Britain now stands at £1,290 per month. That’s just £83 less than for new tenancies, which Hamptons said was the smallest gap in four years.
Aneisha Beveridge, head of research at Hamptons, said: “After five years of relentless rent rises, the market has paused for breath. Rents on new lets have dipped for the first time since 2020, as falling mortgage rates and a cooling economy ease pressure on the market.
“But for sitting tenants, the story is different. Renewal rents continue to climb, with landlords keen to keep pace with inflation and close the gap with market rates. It’s a sign that while demand may be softening, the underlying cost pressures haven’t gone away.”