Rising Housing Costs and Debt: The New Normal for UK Households

UK households faced record housing costs in 2025, amounting to £226 billion, according to research by Savills. This figure represents a £66 billion increase, or 41%, over the past five years. The rise in costs has been attributed primarily to higher mortgage interest payments, which increased by 9% last year to £53.6 billion, making up more than half of the overall rise. The average annual payment for mortgaged homeowners reached £13,000, while private renters incurred an average bill of £15,000, reflecting a 27% increase over the same period. Despite a slowdown in the rate of increase compared to previous years, the burden of housing costs remains significant, particularly for those transitioning from fixed-rate mortgage deals.

The GuardianSavills: UK housing costs hit record high but growth is slowingUK households spent a record £226 billion on housing costs in 2025Birmingham MailThe GuardianBirmingham Mail

The charity StepChange reported that high levels of debt related to essential bills have become the "new normal" for many low-income households. Average rent arrears rose by 15% to £2,372, while mortgage arrears increased by 22%, from £10,239 in 2024 to £12,534 in 2025. Over a third of StepChange's clients were in debt to energy companies, with the average energy debt growing by £220 to £2,560. Vikki Brownridge, chief executive of StepChange, emphasized that rising essential bills have led to increasing arrears across housing, energy, and consumer credit debt. She called for government action, including national social tariffs for energy and water, to make costs more affordable for low-income households.

The GuardianBirmingham MailSavills: UK housing costs hit record high but growth is slowingUK households spent a record £226 billion on housing costs in 2025The GuardianBirmingham Mail

The rising costs of housing and essential bills are compounded by broader economic uncertainties, including potential inflation driven by geopolitical tensions, particularly the conflict involving Iran. Lucian Cook, head of residential research at Savills, noted that the impact of higher interest rates on housing costs tends to have a prolonged effect on households' financial capabilities. The prospect of another wave of inflation raises concerns about the sustainability of current housing costs and the ability of households to manage their finances effectively.

Birmingham Mail

Critics argue that the current economic climate and rising costs disproportionately affect low-income households, exacerbating existing inequalities. StepChange's findings highlight that one in two UK adults has experienced problem debt at some point, often due to life events such as divorce or redundancy rather than financial mismanagement. The charity advocates for a more open conversation about debt to reduce stigma and encourage those affected to seek help.

Birmingham Mail

• “Vikki Brownridge, the chief executive at StepChange, said: “The reality is that rising essential bills and with that rising arrears types across housing, energy, and consumer credit debt, have become the new normal for many households.” — Vikki Brownridge, Chief Executive, StepChange

The Guardian

• “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,” — Lucian Cook, Head of Residential Research, Savills

The Guardian

• “Brownridge, chief executive of StepChange, says: “Struggling with debt is far more common than many people realise.” — Vikki Brownridge, Chief Executive, StepChange

Birmingham Mail

The combination of rising housing costs and increasing debt levels presents a challenging landscape for many UK households, necessitating urgent attention from policymakers and support organizations.

The Guardian