Households’ spending on rent and mortgage payments has slowed to its lowest rate since March 2023, following the Bank of England’s base rate reduction in August.
During the last month of the summer, rent and mortgage payments grew by 1.1% compared to 10.8% a year ago and 12.16% at their peak in June 2023, analysis from Barclays reveals.
Growth is at its slowest pace since March 2023, when rent and mortgage payments rose by 0.17%.
Confidence in household finances rises
The bank’s latest Property Insights report found that consumers were feeling more confident about their household finances, but some concerns about rent and affordability remained.
Renters experienced greater constraints on available homes in August as the influx of students back into the market added to competition for rental accommodation.
As housing costs continue to rise, households have been able to make savings on energy bills. Warmer weather coupled with the Ofgem energy price cap resulted in the fourth consecutive month of falling utilities spending, dropping by 11.4% year-on-year.
But bills are set to rise when Ofgem increases the annual energy price cap by 10% in October.
A reduction in energy prices and a slowdown in the pace of inflation, now at 2.2%, has led to 70% of consumers saying they are confident in their household finances, up from 65% in July.
Confidence in the housing market has also risen, increasing from 25% to 29% between April and August. However, with 78% of mortgage holders reporting they have a fixed rate deal, only a small proportion of consumers have felt the benefits of recent interest rate reductions.
In August, the Bank of England reduced the base rate from 5.25% to 5%.
Consequently, only a marginal decrease in those not confident in their ability to afford rental or mortgage payments was recorded, dropping from 16% to 15% month-on-month.
Renters feel the squeeze
For renters, competition for properties is an ongoing struggle. For the fourth month in a row, 20% reported getting less value for their money due to high demand.
Among the 18-34-year-old group, this rises to 26%. Young renters are also facing additional pressures as students enter the market for the new academic term. More than one in six say the influx of students is causing too much competition for properties.
Given the extra squeeze on housing supply, only 14% of 18-34-year-old homeowners say they are considering selling their home, with many opting to retrofit instead. Some 28% say they are making improvements to their home to make it more energy efficient.
Mark Arnold, head of mortgages and savings at Barclays, said: “In the year to date, we’ve seen encouraging signs that spending on rent and mortgages is decelerating on the whole, but unsurprisingly it isn’t a linear descent and we could see some volatility over the coming months, despite the recent interest rate cut.
“Many people think that interest rates are what really determine the mortgage market – and whilst that’s true to some extent, for me, the biggest driver is confidence. If you’re going to make the biggest purchase of your life, you need to be confident that the economy is stable, inflation is under control, and you know what you’re going to pay. That stability and confidence will determine how people spend, even for renters.”
Samantha Partington is a freelance trade and consumer journalist writing about property and personal finance. Previously she worked worked for the Daily Mail and Property Week. She is the former deputy editor of Mortgage Solutions and editor of Specialist Lending Solutions.
Before becoming a journalist, Samantha worked as a mortgage broker and latterly for a mortgage, bridging and secured loan lender. Samantha is CeMAP qualified. Follow her on Twitter @SamJPartington1.
