UK’s sale and rent back sector “desperately needs regulating”, according to a charity.

The Office of Fair Trading (OFT) has launched a market study into sale and rent back schemes, whereby homeowners sell their property at a discount in return for the option to remain in their home as a tenant.

Consumer groups have also warned that some homeowners who take up the offer are offered little protection from rent increases and the prospect of being effectively forced out by their landlord.

Responding to developments, the Homeowners Advice Centre welcomed the OFT probe which it claims is required in part because the number of people opting for the scheme has increased "steeply in the last few months" - thus leaving many more homeowners vulnerable to unscrupulous investors.

A spokesman said: “I estimate 95% of all companies advertising on the internet and the classifieds are individual landlords or small companies looking to build a cheap buy-to-let portfolio quickly as opposed to organisations that have set out to provide long-term lets and debt relief.

“I suspect that most of the smaller providers would close down or stop advertising if the OFT ensured that the lease was a minimum of 20 years and they had to have £1million in equity or liquidable assets before trading.”

A leading economist has also forecast that the key base rate of interest could come down to around 4% by 2009, a leading economist has predicted.

According to Howard Archer, the chief European and UK economist for Global Insight, relief is on the way for beleaguered homeowners but they should not expect dramatic cuts of the kind imposed by the Federal Reserve in the near term.

He said: “We suspect that extended muted economic activity will eventually markedly dilute underlying inflationary pressures and lead the Bank of England to cut interest rates further.

“We believe that interest rates could eventually fall as low as 4% in 2009, but it will be a gradual process.”

To this end, Mr Archer ruled out the likelihood of a cut from the Bank's monetary policy committee this month.

The benchmark rate of interest currently stands at 5%.

New data from the Land Registry has confirmed that the situation in the housing market is continuing to worsen.
However, according to the government body's figures, the average house price in the UK and Wales fell by 0.2% during April.

A number of market analysts have suggested that the slump in mortgage market has resulted in an increased demand for rental properties.
According to Mortgages for Business, rents on buy-to-let properties are on the rise because a growing number of people are unable to afford taking out a mortgage and instead they are opting for rental accommodation.