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London rent rises outpace record UK increase in April

Residential rents in the UK rose at a record rate last month, with tenants in London facing an even greater increase, as higher borrowing costs and a shortage of properties pushed up prices.

Private property rental prices across the country rose 4.8 per cent in the 12 months to April, the biggest increase since the national data series began in 2016, according to figures from the Office for National Statistics published on Wednesday. Renters in the capital faced an even bigger increase of 5 per cent, the highest rate since November 2012.

“The rapid growth within UK rental prices shows no sign of abating”, said Aimee North, ONS head of housing market indices.

The rise in rents comes as property ownership has become increasingly expensive following a sharp increase in borrowing costs. The average interest rate for new mortgages rose to 4.4 per cent in March, the highest level since 2008, according to Bank of England data released in early May.

“As long as mortgage rates remain elevated, more Britons will be inclined to rent rather than taking the plunge into home ownership,” said Myron Jobson, finance analyst at Interactive Investor.

Tom Bill, head of UK residential research at Knight Frank, said a lack of suitable properties was partly to blame for rising rents and was making “life difficult for a growing number of tenants”.

The rising cost of mortgages was reflected in the ONS data, which showed that UK house prices fell 1.2 per cent between February and March, the sixth consecutive month-on-month drop.

“The housing market continued to struggle in March, as affordability issues dampened buyer demand,” said Gabriella Dickens, an economist at Pantheon Macroeconomics.

Mortgage costs have risen rapidly as the BoE pushed through successive interest rate increases, from a historical low of 0.1 per cent in November 2021 to 4.5 per cent at present. Markets expect a further rate rise in June after inflation eased less than expected in April.

The average UK house price was £285,000 in March, £8,000 below the peak in November but £11,000 higher than the same month a year ago, according to the ONS.

The annual pace of house price growth slowed to 4.1 per cent in March — the lowest level since September 2020 — and down from 5.8 per cent in the previous month.

Dickens said she expected house prices to be supported to some extent by a modest recovery in real household income following an increase in benefit payments from April and the decline in energy prices. But she warned that house prices would “remain on a downward trend” for the rest of the year as mortgage rates stayed high.

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