Mortgage and Rent Spending Slows, But Competition for Renters Remains High
The latest Barclays Property Insights report has revealed that rent and mortgage spending slowed to a 17-month low.
This follows the Bank of England’s decision to reduce the base rate in August.
This resulted in increased consumer confidence in their household finances. However, concerns about affordability persist, especially for renters facing growing competition.
Mortgage and Rent Spending
Rent and mortgage spending increased by 1.1% in August, the lowest rate since March 2023. The decline is due to the Bank of England’s rate cut and lower utility bills.
As a result, consumer confidence in their household finances has risen to 70%, the highest level since April.
While the recent interest rate reduction is positive, its impact is limited as most mortgage holders are on fixed-rate deals.
This means that only a small proportion of consumers will immediately benefit from lower interest rates.
Despite this, the number of people concerned about their ability to afford rent or mortgage payments has decreased slightly. Read how mortgage costs are increasing for thousands.
Competition for Renters
For renters, the competition for properties remains intense. Demand continues to outstrip supply, leading to 20% of renters feeling they are getting less value for their money.
This issue is particularly acute among young renters, with over a quarter (26%) reporting difficulties finding affordable housing.
The influx of students into the market at the start of the new academic term exacerbates this problem. More than one in six renters aged 18-34 say that the influx of students creates too much competition for properties.
This housing shortage also discourages homeowners from selling their properties, with only 14% considering selling. Instead, many homeowners are choosing to retrofit their homes to make them more energy efficient.
Other Trends
Apart from showing that rent and mortgage spending slowed to a 17-month low., the report also highlights a surge in spending at garden centres, driven by favourable weather conditions.
Home improvements and DIY spending have declined, but there is a growing interest in undertaking projects later in the year, especially among younger consumers.
Expert Commentary
Mark Arnold, Head of Mortgages and Savings at Barclays, commented on the report,
“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.”
Phil Spencer, TV Property Expert, commented, “As we head into Autumn, there are a number of seasonal impacts on the property market that can prove to be a sticking point for consumers trying to move. Particularly for renters living in university towns, timing is everything, as over the coming weeks, many students will be entering the market to find accommodation near their classes.
