The total amount of rent paid to private landlords is now more than double the amount of mortgage interest paid to banks by homeowners, as demand from renters continues to exceed supply, new research shows.
Renters paid about £54bn to private landlords across the country over the 12 months to the end of June, as the rising number of people renting property places upward pressure on rental values, according to fresh data published by Savills.
For the first time on record, the total rent bill is now more than double the £26.5bn interest being paid by mortgaged homeowners, who have been able to take advantage of a prolonged period of low interest rates and cheap mortgages.
The total private rental bill has shot up by £14bn over the past five years, owed largely to a shortage of homes to rent across many parts of the country.
By contrast, the amount of mortgage interest fell by £6.4bn, largely due to low interest rates. Also, older homeowners have continued to pay down debt, thus reducing the interest rate bill.
Just five years ago, the gap between the private rental bill and the mortgage interest rate bill was only £7.4bn. It now stands at £28bn.
The increase in private rental bill has been greatest in London, where stretched affordability and constrained mortgage lending have prevented many aspiring homeowners from gaining a foot on the housing ladder, creating greater competition for homes to rent.
“It is widely accepted that the solution to the affordability crisis in home ownership is to build many more homes,” said Lucian Cook, Savills head of residential research. “The same is true in the private rented sector. Savills analysis for the British Property Federation shows that there are now almost 100,000 build to rent homes under construction or in planning across the UK, up from 48,000 last year.”
“This is real progress, but we need policy that encourages the rapid expansion of build to rent,” he added.