London [UK], June 21: Britain's housing market strains are spreading to the rental sector with the proportion of household income spent on rent hitting the highest in a decade in May, data showed on Tuesday, adding to wider cost-of-living pressures.
Asking and agreed rents continued to outpace incomes with tenants spending 28.3% of their pre-tax earnings on rent last month, above the 10-year average of 27%, Zoopla said.
May's figures marked the 19th month in a row that rental price growth outstripped incomes.
"The cost of renting is at its highest for a decade with emerging signs of stress for some renters, especially those on lower incomes," Zoopla Executive Director Richard Donnell said.
Renters in London bore the brunt of the affordability squeeze with rent averaging 40% of gross earnings.
Donnell said the "chronic imbalance" between supply and demand continued to push up rental prices. He expected affordability strains to slow the pace of rental growth in 2024.
Homeowners looking to remortgage and prospective buyers are facing rising mortgage rates as high inflation and strong wage growth increase the likelihood of further Bank of England interest rate increases.
The BoE is expected to raise its Bank Rate to 4.75% on Thursday in an effort to bring inflation, which was a higher-than-expected 8.7% in April, back to its 2% target. Inflation data for May is due to be published on Wednesday.
Mortgage lenders including Nationwide, HSBC and Halifax have repriced or pulled home loan offerings in recent weeks.
Financial data firm Moneyfacts said average two-year fixed mortgage rates rose to 6.07% on Tuesday, up from 6.01% on Monday and the highest since Nov. 29, after the market turmoil caused by former Prime Minister Liz Truss's "mini-budget".
"While there is concern over the impact of higher mortgage rates on those with mortgages, renters have already seen a 2,820 pounds ($3,597.19) a year increase in rental costs over the last five years," Zoopla's Donnell said.
Zoopla's report showed a rise in the number of people struggling to pay their rent, with 15% of renters saying they found it very difficult to pay, up from 10% in the six months to November. Just under half said it was easy or very easy.
Zoopla said 53% of renters it surveyed reported a rent rise in the six months to May, up from 35% six months earlier.
($1 = 0.7839 pounds)
Source: Fijian Broadcasting Corporation