UK rental falls for first time since 2003

Rents for U.K. homes fell for the first time in five and a half years as the worst housing slump since the 1990s caused a record increase in properties put on the buy-to-let rental market, the Royal Institution of Chartered Surveyors said.

Landlords and letting agents report that rents on properties fell outnumbered by those who said they rose by 12 points in the three months ended Oct. 31. Those reporting an increase in the number of rental listings was 56 % higher than those reporting a drop, according to the survey.

U.K. home prices fell an annual 14.6 percent in October, the biggest decline since the 1991 recession, according to mortgage lender Nationwide. The 12-month slide and the seizure of the mortgage market deterred buyers, forcing them into rental accommodation. More homeowners became landlords because they didn't want to sell at distressed prices, RICS said. The rental market in Wales however registered one of the two biggest take ups in new landlord instructions across the U.K.

The lower rental income may also hurt the buy to let investor who took advantage of low borrowing costs and rising home prices to buy rental properties. These private landlords, who mostly financed their investments with buy-to-let' mortgages, own more than 1 million rental homes across the U.K.

Standard & Poor's Ratings Services commented that it expects an increase in arrears, defaults and repossessions for landlords who relied on these mortgages to buy their rental properties in 2006 or later.

The ratings company said 3.7 percent of a group of 200,000 buy-to-let mortgages were in arrears at the end of June. In a separate sample 2.9 percent of residential mortgage owner-occupied homes were in arrears.