UK rents increase at fastest pace for 7 years

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Annual rental costs within the UK rose 5 per cent in Might, the very best charge for seven years, placing renters underneath additional monetary pressure as the price of residing disaster deepens, new information confirmed.

Lease rises have been most acute in London the place they grew 5.1 per cent, in line with the Workplace for Nationwide Statistics on Wednesday, with hovering mortgage prices darkening the property market outlook.

Increased mortgage prices are already weighing closely on hundreds of thousands of householders and making it harder for potential patrons to buy a property and pushing rental demand larger.

“Rising mortgage charges will exacerbate the state of affairs this yr, and upwards strain on rents is unlikely to relent any time quickly,” mentioned Tom Invoice, head of UK residential analysis at property company Knight Frank.

The 5 per cent improve was the most important recorded because the ONS information set started in January 2016, and was up from 4.8 per cent in April. 

Markets are pricing in additional will increase forward of an anticipated Financial institution of England rate of interest rise on Thursday, its thirteenth consecutive improve because it struggles to tame stubbornly excessive UK inflation.

On Wednesday, information from the ONS confirmed that inflation remained unchanged at 8.7 per cent, disappointing expectations of a decline.

In the meantime, mortgage charges have risen to about 6 per cent, close to to the place they stood in 2007.

The ONS additionally reported that the typical UK home value dropped to £286,000 in April, £7,000 beneath its September 2022 peak.

“Had been mortgage charges to be sustained at that degree for a number of years, a 25 per cent drop in home costs can be seemingly,” mentioned Andrew Wishart, economist at Capital Economics.

He added that the influence of upper mortgage charges can be worst for the estimated 1.4mn households reaching the tip of their fixed-rate offers this yr — their improve in funds can be much like these incurred by debtors within the late Eighties.

“The longer term for the property market feels very unsure” mentioned Jamie Elvin, director at Brighton-based Try Mortgages. “I concern for the property market, and a home value crash appears inevitable at this level.”

Rents rises have additionally been pushed by a scarcity of housing inventory, compounded by tax adjustments which have hit landlords and main some to withdraw from the property rental market, consultants warn.

The newest survey by the Royal Establishment of Chartered Surveyors reported a rise within the variety of buy-to-let landlords seeking to promote their properties and a decline in curiosity from abroad buy-to-let buyers.

Julian Jessop, Economics Fellow on the Institute of Financial Affairs think-tank mentioned the federal government ought to keep away from introducing mortgage subsidies or value controls.

However, he added, it had “a job in tax and regulatory reform, together with fixing our damaged planning system, to ease constraints on the provision aspect and to spice up the financial system’s productive potential”.