But spending growth slows even as borrowers prepare for costlier remortgages
Household spending on rent and mortgages rose 4.6% year-on-year in May, according to new data from Barclays Property Insights. This marked the third month of slowing growth, following a 5.2% increase in April.
The easing comes as some mortgage holders brace for higher costs once their current fixed rate deals end. Borrowers on five-year fixed mortgages secured during the low-rate environment of 2020 are expected to face higher repayments when they refinance.
While mortgage expenses have not surged across the board, the shift in interest rate conditions has created a split. Homeowners on shorter two-year fixes may benefit from slightly lower rates now.
Barclays reported that 29% of mortgage holders plan to refinance in 2025. Of these, 72% expect to pay more, estimating an average increase of £331 in monthly repayments — or nearly £4,000 a year.
Following a recent cut in the Bank of England’s base rate, some borrowers are exploring longer fixed-rate options for greater stability. About 35% of those refinancing this year are considering this approach. Others are seeking more flexibility, with 25% open to moving onto a Standard Variable Rate (SVR) and 7% interested in tracker loans.
Barclays’ data also highlighted the challenges renters face when saving for a deposit. Among renters, 44% cite the deposit as a major barrier to homeownership. On average, 22% of those saving are setting aside £254.90 per month.
The time to save for a deposit varies by generation. Renters overall expect it will take 4.5 years. Gen Z savers anticipate needing 3.9 years, while millennials, saving more at £313 per month, expect to buy within 4.7 years. About 17% of renters save inconsistently, putting money away when possible.
To meet deposit targets, renters are cutting expenses and boosting income. Over half (51%) are reducing discretionary spending, while 45% are taking fewer holidays. Additionally, 31% have taken on extra work and 40% have launched side hustles.
Only 23% of renters are confident they will own a home during their lifetime, and 18% believe it is achievable within five years. Those with plans to buy expect to do so by age 38 — 10 years later than current homeowners, who bought their first property at age 28, on average.
Concerns over affordability persist, with 58% of renters saying that homeownership would not be possible without family assistance or inheritance.
Barclays data also suggests that buyers are negotiating more aggressively. Nine percent of UK adults made property offers in the past year, typically bidding £3,898 below the asking price. Two-thirds (65%) of buyers offered less than the listed price, while 25% went above.
In contrast, sellers have accepted an average of £6,818 below the asking price. However, 15% of sellers say they are unwilling to consider offers under the listed amount.
“Homeowners nearing the end of a five-year fixed rate mortgage are preparing for an increase in their monthly repayments as they transition to higher rates, prompting many to weigh up the certainty of a longer-term fix against the flexibility of a variable or tracker product,” said Jatin Patel (pictured left), head of mortgages, savings and insurance at Barclays.
“However, the current interest rate environment has not dampened renters’ appetite for getting on the property ladder, many of whom are taking steps to save enough for a housing deposit. For those ready to buy, our data shows that we’re currently in a buyers’ market when it comes to negotiations, with most sellers willing to accept offers under asking in order to facilitate their next move.”
Will Hobbs (pictured right), managing director of Barclays Private Bank and Wealth Management, said they remain a little more upbeat on the UK’s economic outlook than many.
“That more optimistic tilt rests on the aggregate balance sheet strength of the UK’s households as well as still brisk real wage growth for those in work,” Hobbs added. “Unemployment is low, and this latest hump in inflation is unevenly fading, which should allow interest rates to continue to trickle lower in the quarters ahead.”
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