Rent Up 7.4%, Mortgage Inflation at 2.8% – Make the Switch

Renters across the UK — particularly in the private sector — are facing the highest inflation pressures of any household group, as official data shows annual rent inflation hitting 3.6% in March 2025. For contractors, this reflects a critical shift in the cost of living landscape, with housing affordability becoming more strained just as economic uncertainty lingers.

With average UK private rents rising by 7.4% year-on-year to £1,335 a month, many households are struggling to keep up. Meanwhile, lower inflation among homeowners points to a growing financial divide. For those in contract-based work or renting long-term, understanding these trends is essential for better budgeting and planning.

According to the Office for National Statistics, private renters saw the highest household inflation rate in the UK at 3.6% in the 12 months to March 2025. This far outpaces the average household inflation rate of 2.6% over the same period, underscoring how acutely rising rents are impacting tenants.

Private rental payments have climbed sharply, with provisional estimates for May putting the average monthly rent at £1,335 — a 7.4% annual increase. In contrast, inflation for social renters stood at 3%, while mortgage-paying households saw just a 2.8% rise. Outright owners experienced the lowest inflation at 1.8%.

Notably, inflation also diverged by household type. Working households faced a 2.8% rise in costs, compared to 2.1% for retired households, reflecting how wage-sensitive groups are absorbing more of the financial burden.

With rent inflation running hot and homeownership still out of reach for many, contractors renting privately are likely to feel the squeeze more than most. Variable incomes and short-term lease arrangements make this group especially vulnerable to rapid rent increases and tightening rental supply.

Sarah Coles, head of personal finance at Hargreaves Lansdown, noted that while headline inflation eased early in the year, April brought renewed challenges. “Unfortunately, life is only going to get tougher… those same groups are likely to face the biggest challenges in the months to come,” she said.

There is some relief on the horizon for mortgage holders, as fixed-rate remortgaging costs have begun to stabilise. However, for renters, the outlook remains more volatile. ARLA Propertymark president Angharad Trueman called on policymakers to reduce the tax burden on landlords, which could help ease rental costs by boosting supply in the sector.

At Contractor Mortgage Solutions, we monitor shifts like this closely. If you’re planning your next move, looking to switch rental properties, or saving for a deposit, our expert advisors can help you navigate today’s fast-changing housing market — with strategies tailored to contractors and freelancers.