Rental expenses in the UK hit 10-year high amid housing market challenges

The challenges faced by the housing market in Britain are now affecting the rental sector as well. According to recently released data, the percentage of household income spent on rent reached its highest level in ten years in May, contributing to the overall increase in the cost of living.

Zoopla reported that both asking rents and agreed rents continued to rise faster than incomes. In May, tenants were allocating 28.3% of their pre-tax earnings towards rent, surpassing the 10-year average of 27%. For the 19th consecutive month, rental prices in May exceeded income growth, reaching the highest level in ten years. Among the most affected by the affordability crisis were renters in London, where the average rent amounted to 40% of their gross earnings.

According to experts, the persistent “imbalance” between the supply and demand of rental properties continues to drive up rental prices. They anticipated that affordability challenges would slow down the pace of rental growth in 2024.

Meanwhile, homeowners planning to remortgage, and potential homebuyers are encountering increasing mortgage rates due to high inflation and strong wage growth. These factors raise the likelihood of further interest rate hikes by the Bank of England.

It Is expected that the Bank of England will raise its Bank Rate to 4.75% soon as a measure to bring inflation back to its target of 2%, considering that inflation stood at a high of 18.7% in April. Data for May’s inflation is scheduled to be published soon. .Several mortgage lenders, including Nationwide, HSBC, and Halifax, have adjusted their mortgage rates or withdrawn certain home loan options in recent weeks.

According to the financial data firm Moneyfacts, the average interest rates for two-year fixed mortgages increased to 6.07% on Tuesday, up from 6.01% on Monday. This marks the highest level since November 29. The market turbulence caused by former Prime Minister Liz Truss’s “mini-budget” is believed to be a contributing factor to this rise.

While there is apprehension about the potential impact of higher mortgage rates on individuals who already face challenges in securing affordable housing, it is worth noting that renters have experienced an average yearly increase of £3,597.19 ($3,597.19) in rental costs over the past five years.

According to Zoopla’s findings, there has been an increase in the proportion of individuals facing challenges in meeting their rental payments. The report revealed that 15% of renters found it very difficult to pay their rent, compared to 10% in the previous six-month period leading up to November. On the other hand, just under half of the respondents stated that paying their rent was easy or very easy.

Zoopla also highlighted that 53% of the surveyed renters reported experiencing an increase in their rent within the six months leading up to May. This percentage marks a significant rise from the 35% reported six months earlier.

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Rental expenses in the UK hit 10-year high amid housing market challenges

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