Surging interest rates have inflated annual mortgage payments for typical homeowners by £2,829 compared to 2022.
Property firm Savills reports that the average mortgaged homeowner now pays £12,754 annually.
Private renters have also seen a significant increase, with average annual rent payments rising by £2,195.
This escalation pushes the average annual rent for households to £14,458.
British households, encompassing both renters and homeowners, collectively spent a record £217 billion on housing expenses in the past year.
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Total housing costs in 2024 exceeded the previous peak in 2016 by £8.6 billion, even after adjusting for inflation.
London residents alone accounted for a quarter of the total national housing expenditure in 2024, contributing £54 billion towards mortgage payments, interest, and rent.
National housing costs in Britain have surged by £41.2 billion in the last two years, representing 60% of the total increase over the past decade, according to Savills.
The past year alone witnessed a £19.8 billion surge in housing costs.
Rising Housing Costs: Key Drivers
The total expenditure for Britain’s 8.5 million mortgaged owner-occupiers reached £110 billion last year.
This translates to an average annual mortgage payment of £12,754 per homeowner, marking a £2,829 increase from 2022. In contrast, 9.6 million homeowners without mortgages remained unaffected by these rises.
The primary impetus behind the escalating costs is the substantial increase in mortgage interest repayments, which have jumped by 32% in the last two years.
Lucian Cook, head of residential research at Savills, commented: “Although mortgage rates softened last year, the elevated expenses faced by households reflect those concluding fixed-rate deals or relocating.”
He added, “While further reductions in mortgage rates are anticipated this year, a considerable number of households are still due to reach the end of five-year fixed-rate agreements later this year, and they will encounter an increase in their housing outgoings.”
Moneyfacts data indicates that the average two-year fixed mortgage rate was 6.01% at the close of 2022, decreasing to 5.47% by the end of 2024.
Rates reached their peak in August 2023, with two-year fixed mortgages averaging 6.86%.
Conversely, total rental costs for tenants amounted to £81 billion in the last year.
After a £2,195 increase in the past two years, the average annual rent for households reached £14,458.
Cook explained: “Despite a deceleration in rental growth in 2024, a notable rise in the overall rental bill demonstrates the delayed impact of previous growth on current payments.”
He further noted, “Rents across the nation have reached an affordability limit, yet tenants are still allocating a larger portion of their income to rent than at any point in the preceding two decades.”
Savills highlighted London, stating: “Tenants here have disproportionately borne the impact of rental growth and are typically most vulnerable to higher mortgage costs.”
The North East of England experienced the smallest growth in total housing costs, with a 17% increase over the last two years.
Interest Rate Decisions and Future Outlook
Recently, the Bank of England maintained the interest rate at 4.5%. Only one member of the Monetary Policy Committee favored a rate reduction to 4.25%.
Analysts predict a decrease in the base rate later this year, which is expected to alleviate mortgage costs for some homeowners over time.
Ben Thompson, deputy chief executive of Mortgage Advice Bureau, stated: “Currently, the struggle is between inflation and economic expansion.”
He elaborated: “The Bank of England’s recent decision signals a greater concern for inflationary pressures than for the current weak GDP figures.”
Thompson added: “The prevailing view is that this concern will shift later in the year, potentially leading to further rate cuts. However, for now, the focus remains on controlling inflation, hence the decision to hold rates steady.”
Myron Jobson, senior analyst at Interactive Investor, commented: “The timing of the Bank of England’s next interest rate cut remains uncertain. Financial markets suggest May, although this is not guaranteed.”