Home costs rise as optimism grows in property market, Barclays research finds

Data from millions of Barclays current accounts reveals that spending on rent and mortgages increased by 6.3% year-on-year in May, up from April’s 3.6% rise. Despite this, there are signs of optimism due to falling inflation and energy prices, and increased spending on home improvements.

Barclays Property Insights data shows a continued acceleration in the cost of rent and mortgages, with a 6.3% increase year-on-year in May. Consumer confidence has been affected by rising household bills, such as broadband and council tax. However, the latest inflation figures provide some comfort, with 62% of people feeling more able to live within their means and 56% feeling more confident in their household finances. Confidence in the UK housing market also saw a slight increase from 25% to 27% last month.

Despite the rise in housing costs compared to 2023, the month-on-month difference was minimal (-0.01%), suggesting consumers may not feel worse off in the short term. The decrease in the Ofgem energy price cap in April led to a 12.5% fall in consumer spending on utilities in May.

Getting on the property ladder remains a significant milestone for many Brits, with 10% of those who have never owned a property feeling societal pressure to become homeowners. The cost of a deposit is the biggest barrier for 30% of prospective buyers, while 18% are delaying purchases due to high interest rates. Some renters (15%) prefer the flexibility renting provides, and 12% prefer renting due to low confidence in the housing market.

Generational differences are evident, with 10% of over-55s having received financial support from parents to buy their first home, compared to 19% of 18-34-year-olds. Among homeowners, 30% bought because it was cheaper than renting in the long term, and 24% saw it as a good investment.

Consumer spending on home improvement showed signs of recovery last month, with furniture stores seeing their smallest decline (-2.3%) since last August and home improvement and DIY stores having their best performance (-5.4%) since last September, likely boosted by the early May bank holiday.

Mark Arnold, head of savings and mortgages at Barclays, said: “Our latest spending figures show that rent and mortgage payments are still posing a challenge for consumers.

“However, there are encouraging signs of improvement ahead, with falling inflation and interest rate cuts in Europe giving hope that the Bank of England will follow suit in the coming months.

“Many lenders are finding creative solutions to the problems faced by first-time buyers. Products like Barclays’ Springboard mortgage or Kensington Mortgages’ flexible lending criteria help to overcome some of the barriers and make homeownership more feasible.”