The latest reports from the Office for National Statistics (ONS) shows that Consumer Price Index rose (CPI) to 4.4% in February. This is not only a 28 month high but also higher than the 4.2% that was being forecasted by the various analysts and economists. The more worrying figure is actually the Retail Price Index (RPI) which rose to 5.5% and is currently at its highest level for 20 years!

Swap rates always have a story to tell in terms of the future interest rates. One-year swaps surged from 1.27% to 1.34% while five-year swaps were up from 2.79% to 2.90%.

Average diesel prices crossed the 140p mark and average cost of petrol is now about 134p. Brent crude at its two-year highs of $120 due to the unrest in Libya and other oil producing countries in North Africa and the Middle East.  The price of commodities such as wheat and cotton has also increased dramatically in the past twelve months due to the growing demand from emerging markets. And to compound these issues, weakness of British Pound in the foreign exchange markets makes the good more expensive. Some analysts would also argue that the VAT increase has had a profound and long term impact on the inflation rises.

The only silver lining could be the confidence of Mervyn King, the Bank of England’s Governor who insists that the inflation will rise upto 5% in the short term before rapidly falling back to its target of 2% in about two years’ time. This puts doubts in minds of people yet again as to whether the Bank of England will put its rates up next month or will it wait for a few more months say until end of the year before putting the rates up. Stagnant incomes, rising inflation and stringent lending by the banks is just making the situation of UK households worse by the day.

So what does this really mean for landlords?

The fact that first time buyers are not finding it any easier to get their mortgages approved and the combination of low stock of new builds coming to the market means that rental demand is here to stay for the longer term. However landlords should not assume that more tenants means that rents will go up. Rising inflation and stagnant wages limits the affordability of tenants and there is a growing tendency amongst tenants to compromise on their requirements rather than pay more to get their ideal home. In my view, landlords should also be wary of the fact that inflation adds to unemployment and there is an increased risk of tenants losing jobs. Hence, whether landlords like it or not, rent guarantee insurance is almost a necessity, the last thing any landlord wants is miss their rents and the aggravation of delays and defaults.

So in effect for landlords, while inflation might indirectly help with a rise in demand for rental properties, it may not translate into higher rents.


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