Growth in consumer spending on mortgages and rent slowed for the third consecutive month in May, as households grapple with higher borrowing costs and prepare for the impact of remortgaging at elevated rates, according to new analysis from Barclays.

Barclays Property Insights – which draws on internal data and consumer polling – found that annual spending on rent and mortgages rose 4.6% in May, down from 5.2% in April. Utility spending also climbed, up 4.4% year-on-year, marking the first rise in over a year and likely linked to changes in Ofgem’s energy price cap in April.

The report suggests that more homeowners are bracing for increased costs as their fixed-rate deals expire. Three in 10 mortgage holders say they have, or will, remortgage in 2025. Of these, 72% expect their repayments to rise – by an average of £331 a month or £3,972 annually.

IN A FIX

Jatin Patel, Head of Mortgages, Savings and Insurance at Barclays, said: “Homeowners nearing the end of a 5-year fixed-rate mortgage are preparing for an increase in their monthly repayments as they transition to higher rates, prompting many to weigh up the certainty of a longer-term fix against the flexibility of a variable or tracker product.”

Indeed, 35% of those remortgaging this year say they are considering longer fixed-rate terms, while a quarter are looking at reverting to a Standard Variable Rate and 7% are exploring tracker options – a sign that expectations of further rate cuts are influencing borrower behaviour.

LONG ROAD AHEAD

Despite affordability headwinds, appetite to get on the housing ladder remains strong. More than two in five (44%) renters cite the deposit as the primary barrier to buying, and one in five (22%) are actively saving – putting aside an average of £254.90 a month. Across all age groups, renters expect it will take 4.5 years to build a deposit.

Millennials are saving the most, at £313 per month, and expect to buy in 4.7 years. Gen Z renters – typically at earlier career stages – are saving slightly less at £191, but expect to reach their goal in 3.9 years.

BELT TIGHTENING

To do so, many are tightening their belts. Half (51%) are cutting back on discretionary spending, 45% are taking fewer holidays, and 40% have started a ‘side hustle’. Nearly a third (31%) report taking on extra work to boost their savings.

Still, just 23% of renters believe they will own a home in their lifetime, and only 18% think they can achieve it in the next five years. On average, renters expect to buy their first home at 38 – a full decade older than today’s average first-time buyers, who purchased at 28.

Six in ten (58 per cent) say homeownership would be impossible without inheritance or family financial support.

ADJUSTING EXPECTATIONS

The market is also proving favourable for those ready to buy. Nearly one in 10 adults (9%) say they’ve made an offer on a property in the past year – typically bidding £3,898 under the asking price. Of these, two-thirds offered below asking, while a quarter went over.

Sellers are responding in kind. Those who sold or are selling now are accepting offers £6,818 below their listed price, on average. However, not everyone is open to negotiation – 15% of sellers said they would not consider offers under asking.

BUYERS’ MARKET

Patel added: “For those ready to buy, our data shows that we’re currently in a buyers’ market when it comes to negotiations, with most sellers willing to accept offers under asking in order to facilitate their next move.”

Will Hobbs, managing director at Barclays Private Bank and Wealth Management, added: “We remain a little more upbeat on the UK’s economic outlook than many.

“That more optimistic tilt rests on the aggregate balance sheet strength of the UK’s households as well as still brisk real wage growth for those in work.

“Unemployment is low and this latest hump in inflation is unevenly fading, which should allow interest rates to continue to trickle lower in the quarters ahead.”