Interactive Investor

Fast-rising rents a growing blocker for would-be buyers

15th February 2023 10:13

Myron Jobson from interactive investor

ONS House Price Index figures confirm slowdown prognosis.

Commenting, Myron Jobson, Senior Personal Finance Analyst, interactive investor, says: “Official data on home prices confirms the slowdown prognosis from other, more up-to-date, house price indices.

“The average UK house price slowed to 9.8% in December, down from 10.6% in November, marking a return to single-digit growth – just about. While home prices are still high, a slowdown is well under way it seems, as affordability pressures from the rise in mortgage rates to levels not seen since the financial crisis and the ongoing cost-of-living crisis weigh on personal finances.

“First-time homebuyers, who typically have to stretch their budgets to get on to the property ladder, have an especially difficult time when it comes to affordability.

“As always in real estate, it’s a matter of location. In England, the East Midlands had the highest year-on-year price increase in December with 12.3% growth, followed by the North West, and Yorkshire and The Humber, which saw annual price appreciation of 12.2% and 11.8%, respectively. London was the region with the lowest annual house price percentage change in December (6.7%).

“While house price inflation has started to come down, rents have moved in the opposite direction – rising by 4.4% in the 12 months to January – the largest annual percentage change since this records began back in 2016. Fast-rising rent is a growing blocker for many would-be homeowners, curtailing deposit-building efforts.

“Despite a modest slowing in house price inflation, growth is still high – remaining in double digits in some regions. But house prices aren’t the only key determinant for home buyers and sellers. Personal circumstances might require you to buy a home. But if you can’t make the numbers work, rather than stretching too much now, it might be more financially prudent to wait until you are a bit more comfortable financially to buy.”

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