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HomeMore NewsSurge in rental guarantor service demand signals struggles in rental market

Surge in rental guarantor service demand signals struggles in rental market

Rental guarantor service provider Housing Hand has experienced a significant surge in demand for its rental guarantor services, reflecting the challenging year that both private landlords and tenants in the UK have faced.

Over the past six months, Housing Hand has observed a 50% increase in applications for rental guarantees, while the company has also been enrolling approximately 200 new accommodation partners every quarter. Although such rapid growth is typically associated with smaller start-ups, Housing Hand has established itself as the leading player in the rental guarantor services market, having operated in the UK and Ireland for more than a decade.

The rise in rent, combined with the prevailing economic climate, has resulted in a growing need for rent guarantors among individuals seeking accommodation. However, this situation has also led to a higher number of individuals failing the necessary eligibility checks to serve as guarantors. Housing Hand reports that the pass rate for these checks has decreased to approximately 25%.

Consequently, referencing companies are seeking additional assurance, further driving up the demand for rental guarantor services.

Graham Hayward, Chief Operating Officer at Housing Hand, noted, “Many people associate needing a guarantor with students, who have little or no credit history, but that’s certainly not the case these days. Many working professionals now have to provide a guarantor to secure their tenancies, and many of them are turning to professional guarantor services to facilitate this. The result has been a rapid increase in applications for guarantors. The rental sector’s unfortunate storm needs solutions, which we are embracing in collaboration with our ever-expanding partner network. Tenants also need a speedy service, so we have enhanced our tech to be able to scale with demand.”

The combination of interest rate hikes and the continuous exodus of landlords from the private rented sector has contributed to rising rents throughout the UK. In numerous areas, rents have seen a steep incline. Home reports an 11.4% increase in rents across the UK in the past year, while Foxtons notes a 13% year-on-year rise in London (led by East London, which experienced an 18% increase in rents since May 2022).

For many landlords, the surge in interest rates has become the final straw, following years of diminishing profitability in the private rental market. According to Zoopla, 11% of the homes listed for sale on its platform were previously rental properties, reflecting the ongoing mass exit from the private rented sector.

In most regions, Zoopla’s data shows that the number of available rental homes is between 20% and 40% lower than pre-pandemic levels.

James Maguire, Head of Sales and Business Development at Housing Hand, stated, “With demand continuing to outstrip supply, and increased interest rates and inflation impacting many private landlords, the Housing Hand team is working ever more closely with our purpose-built student accommodation providers and Build to Rent partners, whose co-living model can offer real value to renters. Using a guarantor company means these businesses can reduce the cost of onboarding new tenants and remove the risks associated with tenants defaulting and the administrative burden of recovering unpaid rent.”

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