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Landlords hit by mortgage rate hikes are demanding guarantors from increasing numbers of high earning tenants.
Many tenants are seeing a greater proportion of their take-home pay go towards rent so are having to provide the additional security of a guarantor when signing new agreements.
It’s a trend which Goodlord expects to continue throughout the rest of 2023, as rental prices are predicted to peak over the summer months.
Goodlord’s analysis of more than 220,000 tenancies reveals a steady increase in requests for renters who earn between £25,000 and £74,999 to provide a guarantor, up from 3.7% in 2020, to an average of 5.8%, an increase of 58%.
Surprisingly
Perhaps more surprisingly, there has also been a big jump in those earning between £50,000 and £74,999 being asked to provide guarantors, despite salaries in this range being far higher than the national average. In 2020, this was true of just 1.3% of earners in this bracket and is now 2.5%, a 92% increase.
Oli Sherlock, director of insurance at Goodlord, says the supply and demand problem means rents are rising at a time when tenants have less disposable income thanks to the cost-of-living crisis.
Obligations
He adds: “This means more tenants are being asked to show they have the support in place to meet their rental obligations, should they need it. As well as a rise in the number of tenants who find themselves needing to provide a guarantor, we’ve also seen a big increase in landlords taking out rental insurance.
“It’s a far from ideal situation for either tenants or landlords. The government should see this as an additional sign that more support for the rental market is urgently needed.”
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