Renters see steeper cost rises than homeowners since 2022

Private renters in the UK have endured sharper increases in their housing expenses compared to mortgaged homeowners since 2022, research reveals.

According to Zoopla, the average monthly rent now stands at £1,283, surpassing the £1,154 average mortgage repayment.

Over the past three years, renters have seen their monthly costs climb by £221, slightly outpacing the £218 rise in mortgage repayments, driven by higher interest rates.

The property platform says that the PRS has faced intense pressure due to a surge in demand following the pandemic.

Tenant demand is also being fuelled by a strong job market and increased migration for work and study.

Lower income renters hit hardest

Richard Donnell, executive director at Zoopla, said: “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.”

He added: “Renters have faced similarly steep increases in the cost of renting in recent years with rents pushed higher on strong demand and limited supply of homes for rent which has hit lower income renters hardest.”

Landlords aren’t investing

Zoopla says that the tenant demand hike, coupled with a stagnant supply of private rented properties due to limited landlord investment, has pushed rents up.

In some areas, including Oldham, Wigan and Bolton, rents have risen by more than 31% since 2022, starting from relatively low levels.

Unsurprisingly, London has the highest rents, with outer areas like Ilford seeing increases of up to £400 per month.

While strong wage growth has helped some renters cope, those on lower incomes or relying on state support have felt a big pinch from rising costs.

Rent inflation at four-year low

Recent trends show that rent inflation for new tenancies has fallen to its lowest level in four years.

This slowdown stems from reduced migration, improved mortgage conditions for first-time buyers and affordability constraints limiting rent rises.

In contrast, the mortgage market has weathered higher costs, thanks to stricter regulations introduced in 2015 that ensured borrowers could handle higher rates.

Homeowners also benefit from repayments that gradually reduce their loan principal, unlike renters whose payments solely cover housing costs.

Landlords face big cost rises

The chief executive of Propertymark, Nathan Emerson, said: “Many landlords in the private rented sector have faced significant increases to their overall costs, with tax hikes, mortgage rises, as well as continuous regulatory hurdles, which are ultimately making investment less attractive and potentially riskier.

“This has played a key factor in rent rises, as well as worsening the gap in supply and demand levels.”

He added: “Nearly half of all landlords only own one property, showing that many will be unable to justify their current or future investments if costs and regulations continue to increase.

“We need government acknowledgment of the importance that the private rented sector plays in housing the nation and urgent support to boost the supply of homes and crucially, bring down rent levels long term.”