There’s no escaping it: the cost of living in the UK has risen substantially over the last two years. As a nation, we’re seeing everyday items rise in cost. The finger of authority points towards Brexit, the Covid-19 pandemic, and now the political tensions in Russia – all of which are having a global knock-on effect.
In January 2022 inflation hit 5.5%. The cost of the average weekly shop is steadily increasing, and whilst it’s easy to cut back on the finer things in life, it’s hard to escape the price increases when it comes to everyday staples such as bread and milk. It may only be “a few pence here and there” but everything adds up eventually to higher bills at the checkout. Retail analysts Kantar say that the average shopping bill is now £15 per month higher.
Wholesale gas prices have rocketed, sending the UK into an ‘energy crisis,’ with the average household bill for heating the home set to rise by as much as 50% this year.
The property sector has not escaped the chaos, and in particular, those in rented accommodation or seeking to rent, are finding themselves in an incredibly vulnerable position at the moment.
With so many people now flocking back to UK cities for work and university, the demand for rental accommodation is outstripping availability. The average cost of renting in the UK rose by 2% in 2021, the largest increase since 2017. Also, alarmingly, 71% fewer homes were available to rent in London in December, compared with the same period the previous year.
According to Home Rental Index, newly advertised rental prices were rising much faster across the UK as a whole. It said the average rent jumped 8.3% in the final three months of 2021 to £1,060 a month.
Once you’ve been fortunate enough to find somewhere to rent, the initial costs of a tenancy can add further pressure to an already tight budget. Many landlords will require a deposit (or bond) which is usually 4-6 weeks rent, plus your first month’s rent in advance before they’ll hand over the keys.
Recent research by the TSB revealed that one in 10 Britons are struggling financially, with the rental market accounting for 83%, compared with 15% who are homeowners.
The average renter in the UK pays approximately a third of their annual income on rent, compared to the mortgage interest and capital repayments as a percentage of income for homeowners, which stood at a record average low of 16.7% in 2020.
With the disparity between rising living costs and wage increases, it’s never been more important than to decide whether to rent or buy.
Across the UK, homeowners see a relative 25% per cent reduction in their living costs compared to those in rented accommodation, with many banks passing on the Bank of England’s base rate to its borrowers.
For those looking to invest, fixed rate buy to let mortgages can offer some very attractive rates, as low as 1.69%. Based on a two-year fixed rate BTL mortgage of £160,000 monthly mortgage repayments can be a low as £262.
Estate agents are warning of a bleak future for renters, with many landlords feeling the need to sell their property portfolio due to increasing regulation and taxes. This will reduce the rental stock even more, equating to higher rents for the properties available.
It’s looking like a future of careful planning and compromise for those wishing to pursue a property rental. We can only hope that as a sector, the rental market can weather the storm and return to some semblance of normality over the next 3-5 years.
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