UK households faced a staggering increase in housing expenses, with total costs rising by 41% over the past five years to reach a record £226 billion in 2025, according to a new study by property group Savills. This represents a £66 billion surge, highlighting the growing financial burden on both renters and homeowners across the nation.
Mortgage Borrowers Bear the Brunt of Rising Costs
The analysis reveals that mortgage borrowers, particularly those coming off fixed-rate deals, have been hit hardest by escalating payments. Savills identified a sharp 9% increase in mortgage interest payments alone, which climbed to £53.6 billion in 2025. This spike accounted for more than half of the overall rise in housing costs, underscoring the significant impact of higher interest rates on household budgets.
Economic Uncertainty and Inflation Concerns
Lucian Cook, head of residential research at Savills, warned that this trend could persist if economic turmoil, fueled by geopolitical tensions such as US and Israeli strikes on Iran, leads to persistent inflation. "In a market where homeowners are fixing their mortgages for longer, the impact of higher interest rates on housing costs – and on households’ ability to spend elsewhere in the economy – tends to have a much longer tail," Cook explained.
He added, "Until recently, 2026 looked set to offer some respite, but that is now less certain given the prospect of another wave of inflation, which mortgage markets are typically quick to price in." Recent data shows the average two-year fixed-rate mortgage has topped 5%, up from 4.84% at the end of February, with lenders actively repricing loans in response to market conditions.
Breakdown of Housing Expenditures
Including regular capital repayments, the total bill for 8.8 million mortgage holders reached £114 billion in 2025, translating to an average annual payment of £13,000 per borrower. Meanwhile, rental costs increased more slowly, rising by 2.75% to £112 billion in the same year.
Of the overall £226 billion total, £81 billion was paid to private sector landlords, averaging £15,000 per rental household. Over the past five years, private renters have seen their bills increase by 27%, adding to the financial strain on tenants.
Regional Variations in Cost Increases
London recorded the smallest percentage increase in overall housing costs during this period, at 36%, compared to 49% in the north-west and 45% in both the north-east and eastern England. However, London still accounts for the largest share of Britain's housing costs, representing 23.4% of the total expenditure.
Market Stability Amid Global Tensions
Despite global uncertainty from conflicts like the Iran crisis, the housing market remains steady. According to property website Rightmove, new seller asking prices rose by an average of £3,023 in March to £371,042, a typical seasonal increase of 0.8%. The number of homes for sale is at an 11-year high for this time of year, which has limited more significant price growth.
Rightmove noted that sales numbers are only 2% behind last year's strong market and 5% above 2024 levels, indicating resilience in the face of external pressures. This stability suggests that while costs are rising, demand for housing continues to support market activity.
The findings from Savills and Rightmove paint a complex picture of the UK housing landscape, where escalating costs are driven largely by mortgage interest payments, yet the market shows signs of adaptability amidst economic challenges.
