UK Housing Costs Reach Record High Amidst Inflation Concerns

UK households spent a record £226 billion on housing in 2025, according to latest research from property firm Savills. This figure represents an increase of £8 billion over the past year, or 3.6%, and a substantial £66 billion rise over the last five years – a 41% increase [1]. While the rate of growth has slowed compared to the sharp increases seen in 2023 and 2024, rising mortgage interest rates are significantly impacting homeowners.

The Rising Cost of Homeownership

A significant portion of the increased housing costs is attributed to mortgage interest payments, which grew by 9% in 2025 to £53.6 billion, accounting for more than half of the overall rise [1]. The average mortgaged homeowner is now paying approximately £13,000 per year, an increase of around £2,829 since 2022 [2]. This burden is particularly acute for those coming off fixed-rate mortgage deals.

Rental Costs Also on the Rise

While the increase in mortgage costs is prominent, rental costs have also been climbing. Total costs for renters reached £112 billion in 2025, representing a 2.75% increase [3]. Private renters paid an average of £15,000 annually, with costs rising 27% over the past five years. The total rental bill, encompassing both private and social rents, amounted to £112 billion [3].

Regional Variations in Housing Costs

Housing cost increases haven’t been uniform across the UK. London experienced the smallest percentage increase over the past five years, at 36%, compared to 49% in the North West and 45% in both the North East and East of England [1]. However, London still accounts for the largest share of the nation’s housing costs, representing 23.4% of the total [1].

Impact of Inflation and Economic Uncertainty

Savills warns that the trend of rising housing costs could continue, particularly if economic turmoil – such as that caused by geopolitical events – triggers persistent inflation [1]. Mortgage markets are typically quick to price in inflationary pressures. Lucian Cook, head of residential research at Savills, noted that while 2026 initially appeared to offer some respite, this is now less certain [1].

Property Market Trends

Despite global uncertainties, the property market remains relatively steady. New seller asking prices rose by an average of £3,023 in March to £371,042, a typical seasonal increase of 0.8% [1]. The number of homes for sale is at an 11-year high for this time of year, which is limiting more substantial price growth. Sales are only 2% behind last year’s strong market and 5% above 2024 [1].

Total UK housing costs reached £217 billion in 2024, a 10% increase from the previous year [2].