COVID-19 SERVICE: We are heightening our efforts to assist the UK retail & leisure industry through this challenging period. Explore this service now… COVID-19 SERVICE

Navigating Rising Interest Rates: Impacts on Homeowners and Renters

Full report: Outlook for UK Retail & Consumer 2023

Navigating Rising Interest Rates: Impacts on Homeowners and Renters

This article is derived from our report 'Retail and Leisure Outlook 2023' in partnership with Natwest, which explores the outlook for retail and retail related industries throughout 2023, with key trends and strategies to stay ahead.


5 minute read


Interest rates are on the rise, and this is causing concern among those planning to remortgage in the coming year and beyond. After a decade of ultra-low rates, the prospect of higher interest rates is becoming a reality. In fact, a recent survey revealed that a net balance of 44% of mortgage holders are worried about interest rate hikes in 2023, compared to only 26.1% of homeowners without mortgages. Let's delve deeper into the implications and explore how this affects both homeowners and renters.

Please remember this article contains only a small amount of the content contained in the report, download the report for even more insights!


Implications for Homeowners –

Over two million households are set to remortgage in 2023, and approximately 80% of them have been enjoying rates as low as 2.5% or even lower. However, with the average two and five-year fixed rate reaching 6% by the end of 2022, these homeowners now face the challenge of renewing their mortgage at a significantly higher rate. To put it into perspective, let's consider an average mortgage balance of £150,000 on a 30-year term. With a 6% interest rate, homeowners in this situation would need to pay an additional £345 per month. Collectively, this amounts to a staggering £8.3 billion in annual payments for the two million households impacted.


Mortgage sensitivity: 6% rate mortgage holders would pay extra £8.3bn in
payments per year on £150,000 balance.

Source: Retail Economics 2023


Impact on Renters –

It's not just homeowners who are feeling the pressure; renters are also affected as landlords pass on the increased housing costs. At the close of 2022, rental prices experienced the highest growth rate in six years, standing at 4% (ONS). Renters, who typically spend a larger portion of their income on accommodation, find their discretionary spending power at greater risk due to rising rental values. On average, renters spend £106.50 per week on rent, accounting for housing benefits and allowances, which is equivalent to 24% of their median weekly expenditure (ONS). In contrast, homeowners spend an average of 16% of their median weekly expenditure on mortgage repayments.



Impact on spending - 

The rising housing costs directly impact disposable income and weaken spending intentions. Both homeowners and renters are likely to cut back on their expenses, leading to downward pressure on spending, particularly for mid-market brands. Interestingly, a higher percentage of mortgage holders (58.3%) fall into the middle-to-high and high-affluence category, compared to renters (50.7%) who are predominantly low-to-middle and low-affluent consumers.


 Q: Likelihood to change in quantity bought over the next 12 months?

Source: Retail Economics 2023 



As interest rates continue to rise, the implications for both homeowners and renters become more apparent. Homeowners face the challenge of renewing their mortgages at higher rates, leading to increased monthly payments. Renters, on the other hand, experience the strain of landlords passing on higher housing costs, limiting their discretionary spending power. With both groups likely to cut back on expenses, businesses, especially mid-market brands, need to be prepared for a potential decrease in consumer spending.

View the full report here

This work forms part of a wider piece of research and is a downloadable in pdf format


Things to do now

Download the full 'Retail and Leisure Outlook 2023' report here.


Checkout our other Insight Articles here.


Download the full report here

Found this short article interesting?

This article is the first in a series of articles dervied from our 'Retail and Leisure Outlook 2023' report.

When the other articles are released they will also be listed here.

View Full Report Here

Discover what we can do for you

Our analysis and insights help organisations with strategic planning and more. Find out how we can help you…


Other retail insights

Navigating the Cost-of-Living crisis Article

Physical Strategies to Navigate Challenges Posed by the Cost-of-Living Crisis

Discover physical strategies to assist with navigating challenges that have been posed by the Cost-of-Living crisis
Shopper missions vs online delivery Article

Delivering Satisfaction: How Shopper Missions Shape E-Commerce Delivery Priorities

Discover the different types of online shopper, how their priorities affect delivery options and how to accommodate them
Sustainability in Consumer-Facing Industries Article

Sustainable Practices in Consumer-Facing Industries: Driving Change and Navigating Challenges

Discover opportunities for consumer facing industries to adopt sustainable practices to meet consumer expectations
Consumer loyalty is changing in retail, strategies to adapt and keep consumers loyal Article

The Changing Landscape of Consumer Loyalty in Retail

Discover how consumer loyalty is changing in the retail sector, with data on affluence, age & more.