The Hamptons Monthly Lettings Index for June suggested that low homeownership rates in England will lead to a rising number of older renters, and this will account for one million people aged 65 and over.
The firm said people aged 65 and over currently had some of the highest homeownership rates in history, however, the age group coming up behind them were twice as likely to rent. Some 11.1 per cent of people aged 55 to 64 are privately renting and the firm said fewer people reaching retirement were likely to own their home.
Hamptons predicted that a growing number of older renters means those aged 65 and above would be spending £5.1bn in rent each year. The expanding older renter population will lead to this rise to 12.7bn by 2033, assuming there is no rental growth.
Collectively, all renters of all ages will pay around £69bn in rent each year.
The majority or 78 per cent of people aged 65 and over own their home outright, but the number of those in this age group who were renting surpassed the number of those with a mortgage in 2010.
Hamptons said currently, households aged 65 and over who are still paying a mortgage pay £1.8bn annually, which is less than half what is paid in rent.
Aneisha Beveridge, head of research at Hamptons, said: “The rising number of older renters reflects the gradual unwinding of the large increase in homeownership rates after the Second World War. As younger generations who missed out on the homeownership boom age, growing numbers are likely to be renting when they retire.
“The recent rise in mortgage rates will make it harder to buy later in life. It’s long been the case that if you’re not on the ladder by 40 years old, it becomes more difficult. But higher mortgage rates will make this challenge even tougher given the difficulties in stretching a mortgage term to reduce monthly payments, particularly in the early years.”
She added: “As households get onto the ladder later in life, over the next decade there’s likely to be an increase in older households still paying off their mortgage beyond the age of 65. However, this increase is likely to be a small fraction of the growing number who will be paying rent beyond pensionable age, which in turn has the potential to bear significant social, economic and political consequences down the line.”
Average rents rise to new record
The average rent on a newly let property in Britain rose by 9.4 per cent annually to £1,273 a month in June.
Hamptons said this was a new record and the sixth strongest yearly growth since its records began in 2014. This is also £110 a month more than last year.
The average monthly rent on a one-bed home rose by 11.1 per cent annually to £1,017. Hamptons said the rent for an average one-bed home was now equivalent to what a two-bed home would have cost in April last year.
The average two-bed home is now equal to what a three-bed home cost in January last year, with the latest index putting the average monthly rent at £1,170.
Rental growth for two and three-bed homes has been fairly similar at 10.9 per cent and 9.3 per cent respectively.
Average rents have increased across all regions, but there was a slight easing in the pace of growth in Greater London, Scotland and the East of England.
Rents in these regions rose by 12.9 per cent, 8.7 per cent and 5.4 per cent to reach £2,271, £866 and £1,197 respectively.
Average rents in the North of England hit double-digit growth in June, rising 10.1 per cent to £843 each month.
This was the fourth time on record that rents in the North East, North West and Yorkshire and The Humber rose by more than 10 per cent.
Beveridge said: “Rents are rising across the board, which suggests that the supply squeeze and rising landlord costs are pushing up rents across the market. Additionally, high mortgage rates, which have priced out would-be first-time buyers, are stoking rental demand. While there are a similar number of households looking to rent as in 2019, there are 47 per cent fewer homes available.
“With interest rates set to stay higher for longer and few new landlords buying, these pressures seem likely to continue in the medium term.”
