British households now spend more each year on renting than on mortgage repayments, according to research from Savills.
The agent said that £74.8bn is now spent on private and social renting, against £73.2bn for mortgages.
The lion’s share of this growth has come from the private rental market. Over the past five years, regular mortgage repayment costs have risen by 48% to £44bn, but the amount paid in private rent has risen by 56% to £53.4bn.
The research will give further encouragement to an institutional private rented sector.
While the government has firmly stated its aim of a crusade for home ownership, the recently announced restrictions on buy-to-let landlords have been seen by many as a way of encouraging a professionally developed rental market.
At present, less than 5% of the rental market is institutionally backed, but agents have reported between £30bn and £50bn looking to enter the sector.
The Savills research shows that overall, the total cost of property has risen by 29% over the past five years to £148bn, while the value of the entire UK housing market has grown to £6.2tn.
The private rental market now accounts for £1.3tn of that, with the value of the sector rising 55% in the past five years, and the number of households increasing by 28%, to around 5.7m.
But according to Lucian Cook, head of residential research at Savills, the rise in the number of renters is not the only reason for rent now making up the majority of housing costs.
“While the very low cost of interest has suppressed the cost of ownership, the backdrop in terms of accessibility to mortgage debt means an increased proportion of total housing costs is being taken up by private rent,” he said.
Savills said that the number of homes with a mortgage has fallen following the credit crunch – by 8.7% on average to 8.3m – as people have struggled to either join or climb the housing ladder. As a result, the total value of mortgaged homes has by increased just 7% to £2tn.
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