Average Rate Growth Hits Five-Year High, ONS Reports

Monthly rent prices are increasing faster than at any time recorded since February 2017, new figures from the Office for National Statistics suggest. A further 2% increase in England was noted in the year leading up to January, while rents in Scotland were up 2.6% during the same time and 1.4% in Wales.

Last month, the average cost of renting a home in the UK reached a new high of £969 per month.

Speaking on behalf of Hargreaves, senior personal finance analyst Sarah Coles commented on the worrying trend of already cash-strapped renters facing even bigger financial challenges.

“Rents are rising faster than any time in the past five years, forcing tenants to choose between squeezing their spending even harder or uprooting their lives,” she said.

“Either way, they’ll end up worse off.”

East Midlands records the fastest growth in the UK

The fastest increase in private rental costs was noted in the East Midlands, up around 3.6% year-on-year. Despite being home to the UK’s most expensive rental properties, the slowest growth over the same period was recorded in London: an increase of just 0.1%.

With no let-up in sight, experts are forecasting further rent hikes for the foreseeable future, at least.

“It looks like rises are set to go further too,” added Coles.

“Those who can’t stretch their finances to cover their costs face the horrible upheaval and expense of moving home. If their current landlord withholds any of their deposit, they’ll have to find more cash to cover this, on top of the moving costs themselves, which means they’ll be worse off, whatever they do.”

“The Royal Institution of Chartered Surveyors research found that a slide in the number of properties for rent and another rise in tenant numbers are filling agents with confidence that rental prices will be on the rise for months or even years. It expects rent to rise to an average of 5% over the next five years.”

A further blow to prospective homeowners

With the housing sector maintaining its record-breaking momentum built up over the past 12 months, average property prices continue to price millions of would-be buyers out of the market entirely.

Over the course of the year leading up to January, average house prices in England hit a new high of £293,000, while the average cost of purchasing a home in Wales hit £203,000. Across the UK, the average market value of a home is now £275,000, the highest in history.

Alan Fitzpatrick, vice president of lending operations at mortgage specialist Hibito, explained the significance of this year-on-year increase.

“This ONS data reflects the year of the Stamp Duty Holiday, from the first deadline in March, the extended deadline in June, and the lower threshold, which was payable until the end of September,” he said.

“To put this incredible one-year price rise into more context, £27,000 would be the 2022 take-home salary post-tax of someone earning £35,000 (more than the UK average full-time salary, which is £31,285).”

Looking ahead, Quilter mortgage experts see an eventual slowdown occurring, but not on such a level as to prove any real value to struggling buyers or renters.

“Any hopes of a downward tick in house prices have once again been dashed,” she said.

“While a reduction in house prices has not yet materialised, it seems inevitable that there will be a slowdown during the coming year, and there are many factors currently at play that could contribute.”

“While the scales of supply and demand remain firmly tipped in favour of the nation’s home sellers, there’s a good chance that the high rate of house price growth seen during the pandemic will now subside, replaced by more incremental gains during the year ahead,” he said.