Late last year, official data revealed ongoing increases in both house prices and rents, although experts anticipate a deceleration. Rent for properties under private landlords surged to its highest level since records began seven years ago. While house prices continued to climb in the year leading up to November, the Office for National Statistics (ONS) noted a moderation in the pace of growth. Scotland experienced the slowest increase in property values, according to the ONS.
Tenants facing rises
In the twelve months leading up to December, the private rental prices paid by tenants in the UK rose by 4.2%, showing a slight acceleration compared to the 4% increase noted in November. This upward trend represents the largest annual percentage change since comparable records began in January 2016. Landlords have encountered difficulties due to tax and mortgage rate hikes, contributing to their own financial pressures. Renters, in relative terms, allocate a larger portion of their income to housing costs compared to homeowners.
Meanwhile, the Office for National Statistics (ONS) recorded a 10.3% rise in property prices in the year ending November, indicating a slowdown from the 12.4% increase observed in October 2022. Nationally, property prices saw a 10.9% annual surge in England, a 10.7% climb in Wales, a 5.5% uptick in Scotland, and 10.7% growth in Northern Ireland. Within England, the north-west experienced the most rapid price hike at 13.5% annually, while London saw the slowest increase at 6.3%. The typical UK house price in November reached £295,000, marking a £28,000 rise from a year earlier, albeit slightly lower than the previous month’s record high of £296,000.
Prospective buyers faced obstacles due to a sharp uptick in mortgage costs in 2022, driven in part by market reactions to promises of tax cuts without clear funding plans. Despite a gradual decline in the average cost of a new two-year fixed-rate mortgage since market stabilization, it remains notably higher than at the start of last year. Myron Jobson, senior personal finance analyst at Interactive Investor, emphasized the challenges posed by rapid home price appreciation compared to incomes and the heightened mortgage rates reminiscent of the financial crisis.
Recently, the ONS cautioned that many homeowners would confront substantially higher mortgage expenses upon the expiration of their current fixed-rate deals. More than 1.4 million households are set to renew their fixed-rate mortgages this year, with 57% currently paying interest rates of less than 2%. This peak in renewals is expected between April and June, coinciding with 371,000 expiring deals.
