Growth in mortgage and rental spending slows for third consecutive month in May
- Consumer spending on rent and mortgages grew 4.6 per cent year-on-year in May, slower than the 5.2 per cent recorded in April
- Spending on utilities rose 4.4 per cent, likely as a result of April’s energy price cap changes
- Seven in 10 of those remortgaging in 2025 anticipate higher costs, estimating repayments will rise by an average of £3,972 per year
- A fifth of renters are saving for a mortgage deposit and expect it will take four and a half years to reach their goal
- Barclays’ Property Insights combines data from across the Bank with consumer research to provide in-depth analysis of UK housing trends
Data from Barclays Property Insights shows that rent and mortgage spending increased 4.6 per cent year-on-year in May, below the 5.2 per cent recorded in April, and marking the third consecutive month that growth has slowed. However, those nearing the end of five-year fixed-rate mortgages are anticipating increased costs as they roll off onto comparatively higher rates. Meanwhile, spending on utilities rose 4.4 per cent, the first recorded rise in over a year, likely due to the energy price cap changes that came into effect on 1 April.
Three in 10 (29 per cent) mortgage holders report they either have or will be remortgaging in 2025. Of this group, more than seven in 10 (72 per cent) predict that their repayments will rise after remortgaging, estimating they will pay an extra £331 per month on average, the equivalent of £3,972 per year. Given what has happened to interest rates over the past five years, not all of those remortgaging in 2025 will be impacted in the same way. Those who took out five-year fixes in 2020 will likely be rolling off onto comparatively higher rates, whereas those approaching the end of a two-year fix may see a reduction in repayments.
Following the Bank of England’s recent rate reduction, over a third of those remortgaging this year (35 per cent) are considering transitioning to a longer fixed-rate deal when they remortgage. Others, perhaps expecting further rate cuts in the short-to-medium term, would prefer more flexibility. A quarter (25 per cent) would now consider a Standard Variable Rate (SVR) and 7 per cent are looking for a tracker mortgage.
Deposit dedication
Over four in 10 (44 per cent) renters see a deposit as one of the biggest barriers to owning a home, with a fifth (22 per cent) of those saving setting aside an average of £254.90 each month.
Across all age groups, renters anticipate it will take 4.5 years to accrue their deposit. Gen Z, who are saving an average of £191 per month, are the demographic who expect to build their deposit fastest, at 3.9 years on average. Millennials, who are perhaps more established in their careers, are leading the charge with the amount set aside, averaging £313 per month, and expecting to be able to buy after 4.7 years. Just over one in six (17 per cent) aren’t saving a set amount, instead putting money aside as and when they are able.
To build a deposit, renters are using a combination of reducing their outgoings and seeking extra income. Half (51 per cent) cite cutting back on day-to-day discretionary spending, and over two fifths (45 per cent) are going on fewer holidays. Meanwhile, 31 per cent have taken on extra work and 40 per cent report starting a ‘side hustle’.
Homeowner generation gap
Nearly a quarter (23 per cent) of renters are confident that they’ll own a home in their lifetime, and a fifth (18 per cent) believe it is attainable within the next five years. Those who think ownership is on the cards anticipate making their first house purchase by age 38, on average. However, that represents a gap of 10 years compared to current homeowners, who report being 28 on average when they made their first purchase.
Meanwhile, there remains a feeling that home ownership is not achievable on one’s own – six in 10 renters (58 per cent) say that buying a home would be impossible without an inheritance or loan from family.
It pays to negotiate
Nearly a tenth of UK adults (9 per cent) say they have made an offer on a property in the last 12 months, offering on average almost £4,000 (£3,898) less than the price listed by the estate agent. In total, two thirds (65 per cent) said they offered under the asking price, while a quarter (25 per cent) made an offer over asking.
On the other hand, those in the process of selling or who have sold a home in the last 12 months (4 per cent) are accepting an average of £6,818 under the listing price. This suggests that buyers could be negotiating harder, although not all sellers are willing to budge – one in seven (15 per cent) say they would not entertain offers under the asking price.
Jatin Patel, Head of Mortgages, Savings and Insurance at Barclays, said: “Homeowners nearing the end of a five-year fixed-rate mortgage are preparing for an increase in their monthly repayments as they transition to higher rates, prompting many to weigh up the certainty of a longer-term fix against the flexibility of a variable or tracker product.
“However, the current interest rate environment has not dampened renters’ appetite for getting on the property ladder, many of whom are taking steps to save enough for a housing deposit. For those ready to buy, our data shows that we’re currently in a buyers’ market when it comes to negotiations, with most sellers willing to accept offers under asking in order to facilitate their next move.”
Will Hobbs, Managing Director, Barclays Private Bank and Wealth Management, said: “We remain a little more upbeat on the UK’s economic outlook than many. That more optimistic tilt rests on the aggregate balance sheet strength of the UK’s households as well as still brisk real wage growth for those in work. Unemployment is low and this latest hump in inflation is unevenly fading, which should allow interest rates to continue to trickle lower in the quarters ahead.”
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