More Turbulence for Property Hunters in Scotland

It looks like mortgages rates may finally be set to increase after years of record lows. But what impact is that going to have on the already strained private lettings market?

According to reports from the Guardian, mortgage rates could be at the beginning of a long rise. Several lenders, including Tesco Bank and West Bromwich Building Society, are pulling their cheapest loans from the market, causing speculation that the lenders are preparing for the anticipated rise of the Bank of England base rate.

Buy-to-let rates have also seen a sharp increase from West Bromwich Building Society, and ARLA are reporting a drop in the number of ‘reluctant landlords’ on the market as house prices pick up.

The Bank of England increase should not occur for another two years, so it may be a little bit more time before the full picture becomes clear. But as the close relationship between the rental market and house prices has been well illustrated in past years, there seems little doubt that tenants will feel the change in mortgage rates sooner rather than later.

Despite signs that economic recovery is at hand and talk of a possible housing boom, Scottish lettings continued to see ramped-up demand over the summer. Properties on Lettingweb were let on average well over a week faster than they were in 2012 despite a 25% increase in available property.

A closer look at Scotland

What that means is an increase in demand that is still outstripping supply. The picture isn’t much different when subjected to closer scrutiny; Edinburgh and Aberdeen, two of Scotland’s key housing markets, have both seen demand skyrocket.

Aberdeen presents the clearest illustration of the increase in property demand. Despite available stock increasing almost 50% in the past year, the window during which a tenant has to enquire for property is on average less than half as long as it was in 2012.

The lettings market does not look like it can sustain a new influx of renters if borrowing rises in the near future; although the good news is that we can hope economic recovery makes buying an option again. If that does not happen, and buy-to-let mortgages are no longer the attractive option that they have been for the past few years, the alarming notion of a lettings market with less stock and even more demand may rear its head.

If you missed out on property during the hectic summer, make sure to sign up to property alerts so that you get notified on anything new that hits the market in your area. If you’d like more information on the Scottish property market, contact our Lettingstats team.