Inquiry about the nation's inflation rate, along with an exploration of how renting, parenthood, and high incomes may contribute to its escalation.
Rising Private Rental Inflation Appears to Outdo House Mortgage Costs
Households renting private property in the UK are witnessing elevated inflation rates compared to those with mortgages, according to data from the Office for National Statistics (ONS). In March 2025, private renters saw an annual inflation rate of 3.6%, as compared to homeowners without mortgages who experienced a rate of 1.8%.
The sharp increase in private monthly rents is a significant contributing factor. ONS data indicates that private rents surged by 7.7% over the previous 12 months to March 2025, reaching an average of £1,335 per month. While this figure dropped to 7.4% in April, it still signifies a pronounced rise in private rental costs.
In contrast, renters in social housing experienced a more moderate inflation rate of 3%. Homeowners with mortgages faced an annual inflation rate of 2.8%, while mortgage-free homeowners persistently had the lowest inflation rate across all housing types.
Due to the UK's housing shortage and the ensuing pressure on rental prices, private rental inflation continues to outpace mortgage inflation. While mortgage rate hikes affected homeowner costs, some lenders have lowered mortgage rates in recent months, alleviating some of the pressure for mortgage holders.
This inflation disparity between renters and homeowners underscores how the UK's housing crisis disproportionately impacts private renters, who face rapidly escalating rents amid limited supply and high demand.
In other related findings, the ONS data revealed that high-income households saw an inflation rate of 2.7%, while low-income households experienced a rate of 2.5%. Meanwhile, retired households experienced a lower annual inflation rate of 2.1% as compared to non-retired households, which had a rate of 2.8%.
Households in the south-east and major cities are likely to be particularly affected by this situation due to the high cost of living and limited rental property availability, according to Riz Malik, director at wealth management firm R3 Wealth.
As April 2025 brought further cost increases, including energy, water, and council tax bills, life is poised to become more difficult for those most affected by the rising cost of living, especially lower earners and renters.
- With property prices and mortgage interest rates relatively stable, some individuals might consider diverting funds from mortgages to investing in personal finance, specifically focusing on wealth creation.
- In the realm of personal finance advice, experts suggest that private renters should carefully budget and potentially seek alternative accommodation in areas with lower rental costs to more effectively manage escalating expenses.
- For those already owning property without a mortgage, considering renting out the premises might prove beneficial, taking advantage of the ongoing disparity between mortgage and rental inflation rates in the UK housing market.
