Rental prices climb faster than mortgage payments
Private renters in the UK have experienced a larger increase in monthly housing costs since 2022 compared to those with mortgages, according to new analysis from property website Zoopla.
Zoopla’s data indicates that the average rent now stands at £1,283 per month, while the typical mortgage repayment for an outstanding loan is £1,154 per month. Over the past three years, average mortgage repayments have risen by £218 per month, while rents for new tenancies have increased by £221 per month.
The rise in rents has been driven by strong demand for rental properties in 2022 and 2023, alongside a largely unchanged supply of private rented homes due to limited new investment from landlords.
Certain local areas have seen particularly sharp rent increases. In Oldham, Wigan, and Bolton, rents have climbed by more than 31% over three years, starting from relatively low levels.
London continues to have the highest rents, with some areas seeing monthly increases of up to £400 since 2022. The largest gains have been recorded in more affordable outer London districts such as Ilford.
The surge in rental costs since 2022 is attributed to increased demand following the pandemic. Factors such as a strong labour market and higher migration for work and study have contributed to this trend. At the same time, higher mortgage rates during 2022 and 2023 made it more difficult for first-time buyers to enter the property market, resulting in more people remaining in rented accommodation and further straining supply.
While growth in average earnings has supported the rise in rents, those on lower incomes or reliant on state support have felt a greater impact from higher housing costs. However, Zoopla notes that rental inflation for new tenancies has now slowed to its lowest level in four years, as demand has eased and mortgage market conditions have improved for first-time buyers. Affordability constraints are also limiting further rent increases.
The mortgage market has shown resilience to higher costs, a development attributed to stricter lending regulations introduced in 2015 that required borrowers to demonstrate they could manage higher rates. Unlike renters, mortgage holders gradually reduce their loan balance through repayments, which include both interest and principal.
The ongoing challenge for renters seeking to buy homes has sustained demand for rental properties. The supply of rental homes has remained largely unchanged for nearly a decade, maintaining upward pressure on rents.
“A shift to higher mortgage rates raised alarm over how mortgagees would be able to afford higher repayments over the last three years,” said Richard Donnell (pictured right), executive director at Zoopla.
“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 strong 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 it’s vital that the stock of rented homes is expanded across all tenures.”
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