What’s going on here?
Britain's rental scene isn't just heating up – it's on fire, with the cost of rent soaring faster than it has in at least a decade.
What does this mean?
Higher interest rates are making it uncomfortably expensive to buy a home, but rising lease costs aren’t making rental life particularly cushy either. New rental agreements had tenants shelling out 12% more in August compared to the previous year – the sharpest rise since UK property broker Hamptons started tracking the figures in 2014. That’s far from normal: UK rents have risen more in the past year alone than they did from 2015 to 2019, combined. And much of this stems from a supply-demand mismatch: rising mortgage rates have pushed more people to rent, while slowing construction and causing some landlords to sell up and quit the market.
Why should I care?
For you: The rent, as they say, is too damn high.
It’s a tough crumpet to swallow for Brits who are already saddled with the worst cost-of-living crisis in a generation. Renting is supposed to be the fallback option for those who can’t afford to buy. But as rents rise faster than wages, the cost of renting is fast becoming a more grueling stretch and putting those dreams of homeownership even further out of reach. And that’s not likely to help consumer confidence – or the economy.
For markets: The UK’s keeping its hiking boots on.
This data suggests inflation’s likely to remain a problem – at least for the foreseeable future. And that’s unwelcome news for the Bank of England as it convenes this week. The central bank’s been battling the country’s high inflation with a steady barrage of interest rate hikes and this data implies its fight might be far from won. So if you’re wading into UK stocks and bonds, brace for a splash – these waters could remain choppy for some time.
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