Soaring Rent Prices Outpace Mortgage Rates by 21% over a Three-Year Period
In the past three years, rent prices in the UK have been on the rise, driven primarily by a strong increase in demand for rental properties combined with a constrained supply. This trend, however, appears to be slowing down, with rents increasing at their slowest pace in four years as tenant demand cools and affordability pressures start to bite.
As of March 2025, the average rent in Oldham stands at £876 per month, a 35% increase from 2022. Similarly, in Bolton, the average rent is £884 per month, a 31% increase from the same period. Wigan follows closely behind with an average rent of £800 per month, a 32% increase from 2022.
These regional disparities are not isolated incidents. Many other local areas, including Falkirk, Walsall, Wolverhampton, Paisley, Tweeddale, Dudley, Ilford, Kirkcaldy, Romford, Carlisle, Edinburgh, Luton, Blackburn, Manchester, Medway, Motherwell, Newcastle, Slough, and more, have seen rent increases exceeding 30%. In Ilford, for instance, the average rent has increased by £395 per month over the past three years.
The surge in rental demand, post-pandemic, has been a key contributing factor. A strong labour market, higher migration for work and study, and mortgage rate spikes have all played a part in this increase. However, the stock of private rented homes has remained broadly static due to low levels of new investment by buy-to-let landlords.
This imbalance between demand and supply has hit lower income renters hardest. The government's English Housing Survey showed that private renters on lower incomes and those relying on state support have faced a greater squeeze on living costs from higher housing costs. In contrast, the average repayment on outstanding mortgages has only increased by £218 a month.
The good news is that the rate of rent increases has slowed considerably. Rents are rising at their slowest pace in four years, a sign that the market may be starting to stabilise. The average monthly cost of renting a home in the UK has risen by £221 in three years, but this represents a significant slowdown from the double-digit increases seen in previous years.
Despite the slowdown, affordability remains a concern for many renters. On average, private renters spend 34% of their income on rent, while those with mortgages spend 19%. This disparity highlights the need for continued efforts to increase the supply of affordable rental properties and support for those struggling to meet their housing costs.
In conclusion, while rent prices in the UK have seen a significant increase over the past three years, the rate of growth is starting to slow. This trend, driven by a combination of factors including increased demand for rented homes, higher barriers to homeownership, limited new supply in the private rented sector, regional disparities, rising housing and utility costs, and potential landlord cost pass-throughs, is showing signs of easing. However, affordability remains a key concern for many renters, and efforts to increase the supply of affordable rental properties and support for those struggling to meet their housing costs are needed to ensure that everyone can find a home they can afford.
- The slowdown in rent increases does not diminish the concern for personal finance, particularly for lower income renters, as they continue to spend a substantial portion of their income on rent.
- The housing-market trends revealed in the newsletter show that interest rates are not directly affecting the slowdown in rent increases, yet they remain essential in the broader context of personal-finance, especially for those investing in real-estate.
- As the housing-market stabilizes, buy-to-let landlords may be incentivized to increase their investments in the private rented sector, which could lead to an increase in property supply and ease affordability pressures.
- Keeping up with the latest newsletter on the housing-market, particularly the slowdown in rent increases and regional disparities, is crucial for anyone interested in personal finance and investing.
