"The quickest way to alleviate high rents is to grow the stock of homes for rent in both the social and private rented sectors"
- Richard Donnell - Zoopla
New data from Zoopla has revealed that private renters have experienced a greater increase in monthly housing payments since 2022 compared with mortgaged homeowners.
Average rents across the UK now stand at £1,283 per month, while mortgage repayments on an average outstanding loan are £1,154 monthly. Over the past three years, rising mortgage rates have pushed the average mortgage repayment up by £218 per month. Meanwhile, rents for new lets have risen by £221 per month during the same period. This increase reflects strong rental demand through 2022 and 2023, while the supply of private rented homes has remained largely unchanged due to limited new investment by landlords.
Some areas have seen particularly sharp rises in rent over three years, where rental demand has significantly outpaced supply growth. For example, rents have surged by more than 31% in places such as Oldham, Wigan, and Bolton, starting from relatively low levels. London continues to have the highest rents, with certain more affordable outer London areas like Ilford seeing increases of up to £400 per month in the last three years.
The rise in rental costs since 2022 is mainly due to a surge in rental demand following the pandemic. A strong labour market and increased migration for work and study have boosted demand. Mortgage rates jumped through 2022 and 2023, making homeownership harder and causing many first-time buyers to stay in the rental market longer. This has further increased demand while limiting supply, pushing rents higher.
While average earnings have grown robustly over the past three years, supporting rising rents, private renters on lower incomes and those relying on state support have experienced greater pressure on their living costs.
Rental inflation for new lets has now slowed to its lowest level in four years. This change reflects weakening rental demand after a high base, driven by reduced migration for work and study, along with improved mortgage conditions for first-time buyers. Affordability constraints also limit how quickly rents can increase.
The mortgage market has shown resilience despite higher costs, largely thanks to stricter mortgage regulations introduced from 2015. These rules ensured borrowers could afford repayments even with rising rates. One benefit for mortgage holders compared with renters is that their monthly payments cover both interest and loan principal, which gradually reduces over time.
A more challenging route to homeownership for renters seeking to buy sustains strong demand for rented homes. At the same time, the stock of rental properties has remained steady for nearly a decade due to low landlord investment. This ongoing supply and demand imbalance continues to put 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," comments Zoopla's executive director, Richard Donnell. "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.”
Nathan Emerson, CEO of Propertymark, comments, “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 more risky. This has played a key factor in rent rises, as well as worsening the gap in supply and demand levels."
“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 acknowledgement 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.”
