Private renters are seeing costs rise at a faster rate than mortgaged homeowners, analysis from Zoopla has revealed.
Average rents in the UK currently sit at £1,283 per month, with mortgage repayments for an average outstanding loan at £1,154 per month.
Over the last three years, higher mortgage rates have increased the average mortgage repayment on outstanding mortgages by £218 per month. Rents for new lets have risen by £221 pcm over the same period as demand for rented homes grew rapidly over 2022 and 2023, while the stock of private rented homes has remained broadly static due to low levels of new investment by landlords.
Some local areas have registered particularly rapid increases in rents over the last three years as rental demand has run well ahead of the growth in rental supply. In places like Oldham, Wigan, and Bolton, rents have surged by over 31% in three years as rents increased off a relatively low base.
Rents are highest in London with these areas registering the largest monetary increases, up by up to £400 pcm over the last three years with the greatest increases in more affordable areas in outer London such as Ilford in East London.
The rise in the costs of renting since 2022 is down to a surge in rental demand in the wake of the pandemic. A strong labour market and higher levels of migration for work and study have boosted rental demand. Mortgage rates spiked higher over 2022 and 2023 making it harder to buy homes, with many first-time buyers remaining in the rental market for longer, further boosting demand while also suppressing supply, pushing rents higher.
Robust growth in average earnings over the last three years has supported the faster growth in average rents however private renters on lower incomes and those relying on state support have faced a greater squeeze on living costs from higher housing costs.
However, rental inflation for new lets is now running at its lowest rate for four years as rental demand has weakened off a high base due to lower levels of migration for work and study and improvements in mortgage market conditions for first time buyers. Rental affordability is also limiting the pace at which rents can increase.
The mortgage market has been resilient to higher mortgage costs, largely down to tougher mortgage regulations introduced from 2015 which ensured borrowers could afford higher rates in future. One advantage for mortgagees over renters is that their monthly repayments go towards covering both interest costs and the repayment of the loan which reduces slowly over time.
Zoopla says a tougher path to home ownership for renters looking to buy ensures continued strong demand for rented homes in a market, where the stock of homes has remained static for almost a decade due to low investment by landlords. A continued supply/demand imbalance is keeping a steady upward pressure on rents.
Renters are facing growing affordability challenges
Renters in England faced growing budget pressures last year, with tenants on a median household income having to spend 36.3% of their earnings on an average rent of £1,232, the Office for National Statistics reveals.
That’s much higher than the 25.9% tenants who spent in Wales with rent at £702 and 25.3% in Northern Ireland where the average rent is £751.
Since 2016, the proportion of income spent on rent has varied across these regions with England’s tenants consistently exceeding the 30% affordability threshold.
The difference is driven largely by steep costs in London, where renters allocated 41.6% of their income to housing in 2024.
In contrast, Wales saw a gradual decline in affordability in line with tenants in Northern Ireland.
The ONS says that household incomes for private renters have generally risen faster than rents since 2016 across all three nations.
However, a shift occurred after 2021, when rents began to climb more sharply.
In England, incomes continued to outpace rent increases, offering some relief to tenants.
In Wales and Northern Ireland, however, rents have grown faster than incomes, squeezing household budgets.
Regionally, two-thirds of Local Authorities (68.7%, or 217) in England and Wales reported average rents below the affordability threshold last year.
That figure is consistent with the previous year.
London remained the epicentre of unaffordable rents, with all the least affordable Local Authorities located in the capital.
Outside London, Bristol, Bath and North East Somerset, Brighton and Trafford, as well as commuter-heavy areas such as Sevenoaks and Watford, also faced affordability challenges.