Renters seeing bigger increase in monthly payments than mortgaged homeowners

Private renters have seen a greater increase in their monthly housing costs since 2022 than mortgaged homeowners, according to new analysis from Zoopla.

Average rents in the UK currently sit at £1,283 per month, with mortgage repayments for an average outstanding loan at £1,154 per month. Over the last three years, higher mortgage rates have increased the average mortgage repayment on outstanding mortgages by £218 per month. Rents for new lets have risen by £221pcm over the same period as demand for rented homes grew rapidly over 2022 and 2023, while the stock of private rented homes has remained broadly static due to low levels of new investment by landlords. 

Some local areas have registered particularly rapid increases in rents over the last three years as rental demand has run well ahead of the growth in supply. In places like Oldham, Wigan, and Bolton, rents have surged by over 31% in three years as rents increased off a relatively low base. Rents are highest in London with these areas registering the largest monetary increases, up by up to £400pcm over the last three years with the greatest increases in more affordable areas in outer London such as Ilford in East London.  

The rise in the costs of renting since 2022 is down to a surge in rental demand in the wake of the pandemic. A strong labour market and higher levels of migration for work and study have boosted rental demand. Mortgage rates spiked higher over 2022 and 2023 making it harder to buy homes, with many first-time buyers remaining in the rental market for longer, further boosting demand while also suppressing supply, pushing rents higher.

Robust growth in average earnings over the last three years has supported the faster growth in average rents, however, private renters on lower incomes and those relying on state support have faced a greater squeeze on living costs from higher housing costs.

Despite this, rental inflation for new lets is now running at its lowest rate for four years as rental demand has weakened off a high base due to lower levels of migration for work and study and improvements in mortgage market conditions for first-time buyers. Rental affordability is also limiting the pace at which rents can increase. 

Richard Donnell, executive director at Zoopla, commented: “A shift to higher mortgage rates raised alarm over how mortgagees would be able to afford higher repayments over the last three years. The sales market has been resilient thanks to mortgage regulations that ensured borrowers could afford higher mortgage rates. Renters have faced similarly steep increases in the cost of renting in recent years with rents pushed higher on string demand and limited supply of homes for rent which has hit lower income renters hardest.

“Rental inflation for new lets has slowed to its lowest rate for four years which will be welcome news for Britain’s private renters. The quickest way to alleviate high rents is to grow the stock of homes for rent in both the social and private rented sectors. Growing housing supply is a key Government target and its vital that the stock of rented homes is expanded across all tenures.”