UK Housing Costs Rise 41% over Five Years for Renters and Owners, Study Shows

Why It Matters

The steep rise in mortgage costs squeezes household disposable income, dampening broader consumer spending, while persistent inflation could prolong financial strain across the UK economy.

Key Takeaways

• Housing costs up 41% in five years.
• Mortgage interest payments grew 9% last year.
• Renters' costs rose 2.75% to £112bn.
• London accounts for 23.4% of total housing spend.
• Fixed-rate mortgage rates topped 5% amid market volatility.

Pulse Analysis

The UK’s housing market has reached an unprecedented cost level, with total household outlays hitting £226 bn last year. Much of this surge stems from mortgage interest, which climbed 9% to £53.6 bn as borrowers exit fixed‑rate deals and confront higher rates. The average mortgage holder now faces a £13,000 annual bill, a pressure point that reduces discretionary spending and could ripple through retail and services sectors. This dynamic underscores the broader macroeconomic risk of housing‑driven inflation.

Renters have felt a milder impact, with costs rising 2.75% to £112 bn, yet the growth rate still outpaces wage gains in many regions. London, despite recording the smallest percentage increase (36%), remains the dominant cost centre, accounting for nearly a quarter of national housing spend. Regional disparities are evident, as the north‑west sees a 49% cost jump, highlighting uneven affordability pressures. Meanwhile, a high inventory of homes for sale—an 11‑year seasonal peak—has tempered price acceleration, keeping the market relatively steady despite global uncertainty.

Looking ahead, Savills cautions that geopolitical shocks, such as the recent US‑Israeli strikes on Iran, could reignite inflationary pressures, prompting lenders to further raise mortgage rates. Policymakers may need to consider targeted interventions, from mortgage relief schemes to supply‑side incentives, to curb the long‑tail effect on household finances. As mortgage markets quickly price in inflation expectations, the risk of a prolonged cost‑of‑living squeeze remains a central concern for both consumers and the broader economy.