UK Cost of Living Crisis Fuels Soaring Rents and Mortgage Payments

UK's cost of living crisis drives 9% increase in private sector rents, with average monthly rent rising to £1,332 in Buckinghamshire. Homeowners also affected, with 17% remortgaging in 2023 and average monthly repayments increasing by £319.

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Bijay Laxmi
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UK Cost of Living Crisis Fuels Soaring Rents and Mortgage Payments

UK Cost of Living Crisis Fuels Soaring Rents and Mortgage Payments

The UK's cost of living crisis has led to a staggering 9% increase in private sector rents, exacerbating the housing affordability crisis and sparking concerns about home loss. According to the Office for National Statistics (ONS), an estimated 10% of private renters in Buckinghamshire were affected by rising rental costs, with the average monthly rent increasing from £1,221 to £1,332, accounting for 38% of their household disposable income.

Why this matters: The rising cost of living and housing affordability crisis has far-reaching implications for the economy and society, potentially leading to increased poverty and homelessness rates. If left unaddressed, it could also have a ripple effect on the entire economy, impacting consumer spending and overall economic growth.

Homeowners are also feeling the pinch, with 17% of those in Buckinghamshire remortgaging in 2023. Average monthly repayments rose by £319 from £1,476 to £1,795, taking up a staggering 51% of their household disposable income. The ONS analysis reveals that more than a third of those responsible for rent or mortgage payments in Great Britain were struggling to afford them by the end of 2023.

Simon Trevethick, head of communication at StepChange, a charity and debt advice service, highlighted the impact of repeated interest rate rises: "Repeated interest rate rises have pushed mortgage payments up for hundreds of thousands of people and rents have risen to record levels, both inside and outside of major cities, as private renters especially feel the pinch." Trevethick called for government support for households facing increased costs and an end to section 21 no-fault evictions.

The Bank of England's Monetary Policy Committee raised the Bank Rate from 0.1% to 5.25% between winter 2021 and summer 2023, contributing to the increased housing costs. A Government spokesperson said that the landmark Renters Reform Bill is progressing through Parliament and will give tenants more security in their homes. The Government is also providing a £108 billion cost of living support package over 2022-2025, worth an average £3,800 per household.

Private renters are disproportionately affected by the crisis, with poverty rates of 34% compared to 12% for owner-occupiers. Renters are also at the mercy of landlords, who can hike prices or evict them without cause. The Green Party supports rent controls, which would grant local councils the power to cap rents and take action to prevent further increases.

Despite promising to introduce rent caps, Labour has failed to take action, instead focusing on a landlord licensing scheme. The party's leadership has U-turned on its support for rent controls, arguing that they would not solve the problem and could even increase homelessness. Councillor Steve Davis, leader of the Greens on Brighton and Hove City Council, urges the government and council to address the housing affordability crisis.

The Bank of England has kept the Bank Rate on hold at 5.25%, but economists predict that interest rates may fall in the coming months, potentially as soon as June. TSB has cut selected residential fixed mortgage rates by up to 0.15 percentage points, effective May 10, 2024. Matt Smith from property website Rightmove noted, "After a few weeks of mortgage rate increases, we've seen early signs that this current run of increases has peaked and we'd expect that average rates will begin to trickle down again soon."

The UK's cost of living crisis continues to put immense pressure on household finances, with soaring rents and mortgage payments making it increasingly difficult for people to afford housing. As the average rent in Britain now costs 53.7% of the typical take-home pay, up from 40% in 2015, urgent action is needed to address the growing affordability crisis and prevent more people from losing their homes.