UK rents rising at fastest rate in 7 years

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Annual rental prices rose 5 per cent in May, the highest rate in seven years, putting UK renters under greater financial pressure as the cost of living crisis deepens, new evidence showed. data. Rent increases were sharpest in London, where they grew by 5.1 per cent, according to the Office for National Statistics on Wednesday, and high mortgage costs darkened the housing market outlook. Higher mortgage costs are already weighing heavily on millions of homeowners, making it harder for potential buyers to purchase a property and increasing rental demand. “Rising mortgage rates will exacerbate the situation this year, and the upward pressure on rents is unlikely to ease any time soon,” said Tom Bill, head of UK residential research at property agency Knight Frank.

Markets are pricing in further increases ahead of the Bank of England's expected interest rate hike on Thursday, its 13th consecutive rise in its fight to rein in the UK's stubbornly high inflation. On Wednesday, ONS data Russia Mobile Number List showed inflation remained unchanged at 8.7 per cent, disappointing expectations of a fall. Meanwhile, mortgage rates have risen to about 6 percent, close to where they were in 2007. The ONS also reported that the average UK house price fell to £286,000 in April, £7,000 below its September 2022 peak. “If mortgage rates remained at that level for several years, a 25 percent drop in house prices would be likely,” said Andrew Wishart, an economist at Capital Economics.



He added that the impact of higher mortgage rates would be worse for the roughly 1.4 million households reaching the end of their fixed-rate agreements this year: Their increase in payments would be similar to that of borrowers at the end of the decade. from 1980. “The future of the housing market looks very uncertain,” said Jamie Elvin, director of Brighton-based Strive Mortgages. “I fear for the housing market, and a drop in house prices seems inevitable at this point.” Rent increases have also been driven by a lack of housing, compounded by tax changes that have hit landlords and led some to withdraw from the property rental market, experts warn.