The increasing number of renters and low interest rates for existing home owners mean that the total rent bill is now more than double the total interest being paid by mortgaged homeowners for the first time on record.
Savills’ research team says that tenants are now paying over £54 billion in rent to private landlords across Britain; this is more than twice the £26.5 billion mortgage interest paid by owner occupiers - a figure which excludes capital repayments being made on mortgages.
The total private rental bill has risen by £14 billion over the past five years. This is a 35 per cent increase while the number of homes in the private rental sector has risen 21 per cent.
By contrast, the amount of mortgage interest fell by £6.4 billion, largely due to low interest rates. Also, older homeowners have continued to pay down debt, thus reducing the interest rate bill.
Just five years ago, the gap between the private rental bill and the mortgage interest rate bill was just £7.4 billion. It now stands at £28 billion.
The increase in the private rental bill has been greatest in London, where stretched affordability and constrained mortgage lending has prevented more aspiring home owners accessing the market, creating greater competition for homes to rent.
Here, the total rental bill has risen by 42 per cent over the past five years, to over £20 billion and now accounts for over a third of the total GB private rent bill.
Rental need is growing rapidly as the housing market becomes less accessible due to house price growth and lending constraints.
This is particularly impacting younger households, with those under the age of 35 now paying some 44 per cent of the total rent bill.
“It is widely accepted that the solution to the affordability crisis in home ownership is to build many more homes,” says Lucian Cook, Savills head of residential research.
“The same is true in the private rented sector. Savills analysis for the British Property Federation shows that there are now almost 100,000 build to rent homes under construction or in planning across the UK, up from 48,000 last year. This is real progress, but we need policy that encourages the rapid expansion of build to rent.”