Spending on rent and mortgages grew by 5.2% in the year to July 2025 while spending on utilities increased by 2.2% in the same period, according to new data from Barclays.
As fixed housing and utility costs rise faster than inflation, which the ONS reported as 3.6% in June, consumers are seeing more of their disposable income diverted away from savings in order to meet higher costs.
With less disposable income, many renters are unable to put away enough cash to get onto the property ladder, damaging confidence that they will become homeowners, as well as in the wider housing market.
Try 6 free issues of MoneyWeek today
Get unparalleled financial insight, analysis and expert opinion you can profit from.
Start your trial
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Only 12% of renters believe they will be able to become homeowners within the next year, while just 16% think they will own a property in five years time, Barclays found.
Latest Videos FromMoneyWeek
The average UK property cost £271,619 in June, 2.5% more than it was at the same time the previous year, according to Nationwide’s latest house price index.
Meanwhile, affordability pressures are also limiting their choices, as 37% of renters say they are unable to afford to buy a home in the area where they currently rent or would like to live in the future.
Increasingly high house prices and housing costs have ultimately led to renters losing confidence in the property market – just 17% of renters were actively building a house deposit in July, down from 31% in January.
When surveying both homeowners and renters, Barclays found only 26% of consumers were confident in the UK housing market.
This lack of confidence is holding the UK economy back, according to Will Hobbs, managing director of Barclays Private Bank and Wealth Management.
He said: “The UK economy remains in a better place than the public debate would suggest. While there is, as usual, much to worry about, the fact that real (inflation adjusted) household incomes continue to grow briskly remains an important positive, as is the still substantial arsenal of ‘excess’ savings.”
He suggested the key to “unlocking this pent-up spending power” is confidence in the economy.
Mortgage payers are able to stomach cost increases more than renters
In response to repeated interest rate cuts since July 2024 by the Bank of England, more than half of all consumers now believe that renting a home is more expensive than paying a mortgage, Barclays found.
Housing costs are also disproportionately eating into the incomes of renters as housing accounts for 30.8% of renters’ take-home pay, compared to 26.6% of a homeowner’s.
As a result, Barclays found that just over a quarter (26.6%) of renters say they are currently struggling to afford their monthly housing costs, compared to just 15% of homeowners who feel the same way.
Jatin Patel, head of mortgages, savings and insurance at Barclays, said that while many dream of owning a home, “renters are finding it ever harder to save for a deposit while keeping up with rising costs.”
There is, however, some hope. Patel said: “We’re still seeing savers create strong habits, and carefully consider the balance between getting into the market quickly with a lower deposit or trying to minimise monthly repayments in the longer term.”
