Interest rates are continuing to rise in the UK, creating increasing difficulty for people to get onto the property ladder.
According to latest research, newly let properties are 25% more expensive than they were in before the Covid-19 Pandemic took place in 2020. According to information obtained from Hamptons, a Real Estate company, properties are still rising at 9% as of May 2023, compared to the previous year. The rising cost of renting and house prices have set a new precedent, according to the Office for National Statistics (ONS), which claims that this has been the highest record cost for twelve consecutive months now.
Concern has been raised regarding the fate of landlords and homeowners due to the reduction in the pace of annual rental growth and the increased price of mortgage rates. Many of the banks operating in the UK (such as Santander, HSBC and Nationwide) have begun increasing the cost of mortgage rates.
Foxtons, another Real Estate company based in the UK, has claimed that there is a substantial gap between the quantity of people looking for accommodation, versus the quantity of accommodation available. The Chief Executive of Foxtons, Guy Gittens, has stated that they have approximately 97,000 tenants whilst there are only around 2000 available properties.
Furthermore, these issues are also affecting online real-estate companies. The Executive Director at Zoopla, Richard Donnell, has shared his concerns about the rising rent costs as well as the reduced supply of rental properties in the UK. Donnell claimed that the number of rental properties appearing on the site is 33% lower than it was before the Pandemic, in 2020.
According to a survey conducted by Spareroom, there are approximately 5.5 million private rental homes in the UK, yet over a third of these households are spending half of their income on their monthly bills and rent. Similarly, Generation Rent analysed governmental data from 2023 and found that rent arrears evictions are currently the highest that they’ve been on record since 2009. Moreover, Generation Rent also found that evictions under the clause of “no-fault” were also at the highest figure that they have been since 2017.
Unfortunately, the cost of houses and renting isn’t the only expense that is rising. The price of bread, chocolate and cereal has been consistently soaring for several months, and this increase has caused food prices in the UK to be at the highest level of cost since 1978 (45 years ago). The largest price increase has been for food and energy, both of which are products that have become more of a necessity since the Covid-19 Pandemic began. Other effects of these rising prices could be the UK’s decision to leave the EU, and/or the current war between Russia and Ukraine that has reduced the availability of grain.
A lot of the food products that have increased in price are essential, non-luxury products, exemplifying the mass effect of this cost-of-living crisis. According to the ONS, sugar has had a price rise of 47.4%, olive oil has had an increase of 46.4%, frozen vegetables (excluding potatoes) have risen by 31%, and all types of flour have increased in price by 30%.
Furthermore, wages haven’t increased during the cost-of-living crisis alongside the rising cost of necessities, goods, and services. Throughout 2022, the average salary rose by approximately £3 a month (£36 annually); although, when inflation is considered, the average salary in the UK has fallen by 1.3% between 2023’s semi-annual quarter compared to that of 2022.
To combat the rising costs of necessities and goods, the Bank of England has raised interest rates twelve consecutive times, meaning that this figure is now at 4.5%. Despite the Bank of England’s target to keep inflation at 2%, the current rate of inflation is above 10%. The next interest rate account is on June 22nd, 2023, and many residents in the UK fear that interest rates will rise for the thirteenth time since 2022.
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