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UK Housing Market

London Mortgage Costs Outpace Rentals by 42%: Is There No Escape for Generation Stuck?

Across London, homeowners grapple with an average monthly mortgage burden exceeding tenants' rent payments by £797

  • 19% of tenants have experienced having to change rental properties more than five times in five years because of landlords and not through any fault of theirs

  • 17% of tenants say that they have lost out on a property they wanted to rent in the last two years due to a bidding war

  • 15% of landlords say that they are considering selling up due to rising costs

  • 18% of Brits say they were about to become a buy-to-let landlord, but the increased rules and regulations dissuaded them from doing so

New research from London-based property management specialists, SBA Property Management, underscores the formidable obstacles confronting aspiring homeowners seeking to enter London's property market. The study illuminates that mortgage expenditures in the city surpass rental expenses by a substantial 42%, far outstripping disparities observed in cities like Manchester, Leeds, and Bristol. Across London, homeowners grapple with an average monthly mortgage burden exceeding tenants' rent payments by £797, signalling a significant financial disparity between property ownership and rental accommodation. Particularly pronounced differentials emerge in affluent inner London boroughs, where mortgage obligations soar to approximately 66%, translating to £1,232 more per month than rental costs. Even with comparatively affordable locales, the financial chasm persists, with mortgage costs outstripping rents by 16% in Manchester, 18% in Bristol, and 21% in Leeds. This latest data will cause concern for Generation Stuck – those currently unable to buy a home and leave the rental market – with data from Cornerstone Tax – the UK’s leading property tax experts – revealing that a staggering 42% of renters fear that they will be stuck renting of the rest of their lives.

David Hannah, Group Chairman of Cornerstone, highlights that whilst clear affordability issues remain in the housing market, speculation of an interest rate cut later in the year could mean that there is a glimmer of hope on the horizon for those currently stuck in the perpetual cycle of renting. Cornerstone’s research report highlights the dire need for change in the rental market, which has been marred by rising prices and increased competition. Notably, 17% of tenants report losing out on their desired rental properties due to bidding wars within the last two years. The situation is also desperate for those who are lucky enough to secure a property, with a staggering 19% of Brits saying they have had to change rental properties more than five times in five years because of landlords and not through any fault of their own.

The escalating cost of renting has been a significant driver of change in the rental market, with the average cost of rent increasing by 8.3% over 2023; a figure buttressed by soaring interest rates and landlords passing on their escalating expenses to tenants. As a result, 15% of buy-to-let landlords have decided to exit the sector, as revealed by Cornerstone's research. The tax advisory firm cites the mounting costs as a primary reason for selling their rental properties. Furthermore, the survey uncovers that 18% of potential buy-to-let landlords have been discouraged from entering the market due to increased regulations and rules. This growing reluctance of buy-to-let landlords to enter the market will only serve to exacerbate the supply and demand issues which are currently causing upward pressure on prices and bidding wars due to the lack of stock.

Group Chairman of Cornerstone, David Hannah comments:

“The relentless surge in interest rates by the Bank of England last year severely compromised the affordability of mortgages and affected buyers' spending capacity. Yet, amid this challenging landscape, the latest report from Halifax may provide those stuck in the rental market with a glimmer of hope. Speculated interest rate cuts and the first recorded drop in house prices in six months, may suggest that affordability issues could subside towards the end of the year and early 2025. So, while the road ahead may seem uncertain, it's important to remember that even in the face of a challenging market, the property market can adapt and rebound, offering opportunities for those who remain vigilant and strategic.”

David Hannah, Group Chairman

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