Mortgages and rent rose in April, while ground rent and service charges sting leaseholders
Data sourced from millions of Barclays current accounts reveals that consumer spending on rent and mortgage payments accelerated in April, reversing the encouraging slowdown in the first quarter of the year. Meanwhile, leaseholders are finding their housing costs compounded by high service charges and ground rents. To compensate, household spending on areas such as homewares, electronics and DIY fell by -4.1 %, with many consumers opting to postpone renovations.
Barclays Consumer Spend data shows that UK spending on rental and mortgage payments rose 3.6 % year-on-year in April, ending the three-month slowdown in spending witnessed from January to March. Reassuringly, growth remains below February’s figure (4.7 %), and also below the 12-month average (6.5 %), indicating that costs are still heading in the right direction over the longer term.
Just one in four Brits (25 %) is confident in the strength of the UK housing market, following the volatility of the last year. Despite these concerns for the macro environment, confidence in personal finances remains steady, as only 15 % of consumers do not feel confident in their ability to afford monthly mortgage or rental payments, a slight improvement from 16 % in March.
Service charges sting
Service charges and ground rent increases have become an unexpected burden for many affected homeowners, as just over a third of payers (37 %) regard these costs as affordable. Meanwhile, on top of the high price tag, most leaseholders feel blindsided by the charges, as just a third (33 %) recall being made aware of the costs before purchasing their property, and only 23 % saying they understood the rate at which the costs would increase.
On top of affordability, level of service is a growing issue as leaseholders see few improvements to their properties despite the premium – only 13 % feel they get good value for money, and even fewer (10 %) believe the money from their fees is spent effectively. Nearly a fifth (17 %) of those paying service/ground rent fees are also concerned they won’t be able to sell their homes because of the charges.
DIY down as consumers cut costs
Brits are trying to cut down on their household costs, with 40 % saying they will not spend on their home or garden ahead of the summer. Many are opting to postpone renovations or home improvement, as consumer card spending on household categories such as homewares, electronics and DIY fell by -4.1 % in April.
Mark Arnold, head of savings and mortgages at Barclays, said: “Consumers and lenders alike are anticipating a drop in interest rates this year, but optimism is understandably tentative as the market is still feeling the effects of last year’s volatility. Our data shows that Brits are still facing higher rent and mortgage payments, although costs are still slowing down over the longer term.
“Many homeowners have additionally been hit by high service charges in the wake of increased inflation. Prospective buyers considering a leasehold property, especially in managed flats, should ask about these costs early in the process – not just for peace of mind, but also because lenders will want to know about any financial obligations to make sure mortgage payments will be affordable alongside other outgoings.”
