The UK spent a record-breaking £226 billion on housing last year, according to a new report from Savills. This figure, which includes both mortgage payments and rent, has grown by £66 billion over the last five years. The 41% increase underscores the growing challenge of affordability in a high-inflation environment.
A “large increase” in mortgage interest payments is primarily responsible for the recent spike in costs. Interest payments rose by 9% last year alone, totaling £53.6 billion and making up more than half of the overall increase. This trend is largely driven by homeowners who are forced to refinance at much higher rates.
The impact of these rising costs is being felt unevenly across the country. While London’s housing costs rose by 36% over five years, the North West saw an increase of nearly 50%. This illustrates how the rising cost of living is a national issue, impacting households regardless of their proximity to the capital.
There is growing concern that the financial relief many expected in 2026 may be delayed. Market analysts point to global instability as a factor that could lead to another wave of inflation. If inflation remains high, mortgage markets are expected to respond quickly by keeping interest rates elevated.
On a positive note, the market is currently seeing a seasonal increase in activity. Asking prices for homes rose by 0.8% in March, and the number of sales is tracking ahead of 2024 levels. A high number of listings is providing more choice for buyers and preventing the kind of extreme price spikes seen in the past.