As letting fees are finally banned, is this good news for the industry?
Letting fees have always been unpopular, but as the new Chancellor announces that he is planning to have them banned, property selling experts wonder whether this is actually good news or bad news for those stuck in the rent trap.
The housing market can often seem unfair to those looking to buy their first house. It seems a straightforward-enough process – raise a deposit, apply for a mortgage, buy the property and move in – but of course, it’s never that simple.
Between conveyancing charges, solicitor fees, mortgage product fees, land registry searches, homebuyers reports and moving costs, buying a house can leave a new owner stuck on a diet of Pot Noodles and rice for a few months afterwards while they nurse their bank account back to health. On the bright side, however, once all is said and done they are the proud owner of a new home.
Homebuyers aren’t the only ones suffering from additional fees either, and as rental costs continue to rise across the country, it’s somewhat unsurprising that many people have begrudgingly accepted that they may never own a home. However, there are high chances that they will need to move house periodically and as many renters are aware, simply moving from one rental property to another can be a hugely expensive venture thanks to agency fees.
Letting agents are not the most popular people with renters. Seen as unnecessary middlemen by both landlords and tenants, they have of late made themselves indispensable to both parties in an industry fraught with untrustworthy individuals looking to make a quick profit, and for this service a potential tenant can expect to pay a comparatively large fee for the simple pleasure of moving in.
Times appear to be changing though as Philip Hammond, the newly appointed Chancellor of the Exchequer is expected to ban letting fees – a decision that has left agents rather unhappy. While this initially seems to be great news, the Association of Residential Letting Agents (ARCA) has pointed out that in order to recover these costs; the base rent payment for the duration of the contract is likely to increase.
“These costs enable agents to carry out various critical checks on tenants before letting a property,” says David Cox, managing director of ARCA.
“If fees are banned, these costs will be passed on to landlords, who will need to recoup the costs elsewhere, inevitably through higher rents. The banning of fees will end up hurting the most, the very people the government intends on helping the most.”
This is also bad news for vendors who are looking to sell their homes fast, as higher rents mean lower savings for those hoping to buy – forcing them to save for much longer to afford a deposit, and further reducing the pool of available buyers for properties on the market that are failing to attract interest.
Of course, vendors who need a quick sale can take advantage of property buying companies who will buy any home for cash regardless of condition or location.