UK rents soar at fastest rate since 2016 as house price growth slows

UK rental prices have risen at their fastest pace in at least seven years while average UK house price growth continues to slow.

According to the Office for National Statistics (ONS) on Wednesday, private rental tenants in Britain saw a 5.1% increase in the 12 months to June, the largest annual percentage change since records began in January 2016.

It revealed that in England, private rental prices rose by 5.1% in the period, or by 4.9% excluding London, where they rose 5.3%.

Rent increased by 5.8% on an annual basis in Wales, up from 5.0% in May, and the highest annual percentage change at least 2010 (when the Wales data series began).

Private rental prices in Scotland increased by 5.5% in the 12 months to June 2023.

“Thousands of tenants have become trapped in a pressure cooker of limited supply, high competition for rental homes and rapidly rising rents,” Riccardo Tessaro, co-founder and chief executive of Gravity Co, said.

“Relentlessly rising mortgage interest rates – which have now climbed above those seen following last year’s mini-Budget – are pushing up landlords’ costs and many are passing these costs onto their tenants in the form of rent increases.

“Renters are also grappling with a shortage of homes to rent as smaller landlords exit the lettings market as they decide their sums no longer add up.”

He added: “This reduced supply is forcing some would-be tenants into bidding wars where they feel they have no choice but to pay above market value to secure a place to live, further pushing up rents.

Read more: UK interest rates to rise less sharply as inflation drops more than expected

It came as average UK house price inflation slowed, with prices rising by just 1.9% in the 12 months to May, down from a 3.2% rise the month before. House prices have now slowed for seven consecutive months.

Although the average property value is higher than a year ago, at £286,000, prices are £7,000 below the recent peak in September 2022.

Average house prices increased over the 12 months to May to £304,000 in England (1.7% annual growth), £213,000 in Wales, up 1.8%, £193,000 in Scotland (3.2%) and £172,000 in Northern Ireland at a 5% rise.

According to Moneyfacts, the average 2-year fixed residential mortgage rate today is currently 6.81% – up from an average rate of 6.78% on the previous working day.

Meanwhile, the average 5-year fixed residential mortgage rate is 6.33%. This is up from an average rate of 6.30% on the previous working day.

Nick Leeming, chairman of Jackson-Stops, said: “Cash remains king in the current climate, while mortgage rates continuing to fluctuate and weigh heavy on guide prices across the board for downsizers, who make up a huge proportion of sellers in the prime market.

“There is no shortage of people trying to buy houses; on the contrary, buyers still remain committed for the right property, and we are seeing consistent interest for houses that tick all the boxes.”

Watch: Will UK house prices ever fall?

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