A new survey by business consultancy Hargreaves Lansdown suggests that out of the 20 per cent of households who now rent privately, almost four in 10 exact to rent for their entire lives.
Hargreaves Lansdown says private renters spend some 31 per cent of their income (including housing support) on rent, while those with mortgages spend 18 per cent.
And private renters spend £198 on weekly housing costs (£340 in London) – compared to £174 for those with mortgages.
Around a quarter find it hard to pay rent, a figure that rises to over a third amongst the poorest earners. Only 55 per cent of private renters had savings – compared to 81 per cent of owner/occupiers.
Half of those without savings expect to rent for the rest of their lives.
Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, says: “Millions of people are caught in the rental trap – paying a small fortune to keep a roof over their head, and struggling to save, while prices soar even further out of reach. Almost two in five private renters never expect to be able to afford a home of their own, which raises enormous challenges throughout their lives.
“Among those who rented privately, the huge burden of rent meant that housing costs swallowed almost a third of their income, compared to property owners for whom it made up less than a fifth. It meant that one in four of them were struggling to pay the rent, let alone save anything for the future. This was back in 2020/21, well before runaway rents and massive inflation made everything so much harder.
“Even back then, only just over half of renters were able to save anything, which reflects the findings of the Hargreaves Lansdown Savings and Resilience Barometer, which found renters were less likely to have money left over at the end of the month, and less likely to have savings to fall back on.
“What’s even more alarming is that the Barometer forecasts that over the next 12 months, things are going to get even tougher for renters.
And it’s not just the cost, renters are also at the mercy of their landlord, and when they chose to raise the rent or sell the property altogether. Three quarters of private renters moved by choice in 2020/21, but six per cent were asked to leave – and of those, 63 per cent said it was because the landlord wanted to sell.
“This is hard enough at any age, but we’re renting later in life, which makes the upheaval even more difficult to live with. In 2021/21, although 21 per cent of private renters were aged 35 to 44, 17 per cent were aged 45 to 54, and nine per cent were aged 65 and over. What’s more, by this stage we may have families to uproot. Just under one in five private renters were couples with children and just over one in 10 were single parents.”
First Time Buyers Claim Market Is Unaffordable For Majority
Research reveals why many struggle to get their first foot on the property ladder.
New research has found a considerable gap between the average cost of a first home and the borrowing eligibility of an average first-time buyer, leading to the conclusion that the market is unaffordable for the majority of Brits.
Stipendium analysed the purchasing power of the average first-time buyer based on their ability to borrow through a mortgage at 4.5 times their earnings. The platform then looked at how this level of purchasing power compared to the actual sum required to purchase a first home based on the current first-time buyer house price, minus a 15% deposit.
The research shows that across Great Britain, the average annual gross salary of a first-time buyer is £32,927. At 4.5 times their income, it means the average first-time buyer can secure a mortgage on a property valued up to £196,818.
However, the average first-time buyer house price is currently £234,469. Even after deducting a 15% deposit of £35,170, this still leaves £199,298 to be covered by a mortgage, meaning that the average first-time buyer is short by over £51,000 (-26%) based on their income mortgage potential.
London is predictably the least affordable region for a first-time buyer, where their mortgage potential sits at £196,818 based on 4.5 times their income, while the average first-time buyer house price is £457,433, leaving £388,818 to cover once a 15% deposit has been saved – a huge difference of £192,000.
The South East (£94,109), East of England (£88,291), and South West (£88,603) are also home to some of the biggest gaps in first-time buyer affordability between their borrowing potential and the actual cost of buying.
Stipendium said there are two areas in Britain where first-time buyers will be able to acquire a home through a mortgage.
In Scotland, the average first-time buyer earns a gross annual income of £31,172, meaning they are able to borrow £140,276 at 4.5 times this income. The average first-time buyer house price is £149,536, leaving £127,106 to cover when borrowing after a deposit is saved. This means first-time buyers are £13,171 in the green when it comes to property market affordability.
In the North East, first-time buyers are able to borrow £112,716 based on gross income, £12,973 more than the sum required to cover the cost of the average first home less a 15% deposit.
Christina Melling, chief executive at Stipendium, said that years of sustained house price growth have put today’s first-time buyers at a severe disadvantage, especially when considering the fact that the growth in available earnings has not kept pace.
“As a result, many first-time buyers are restricted when it comes to their house hunt, as they can only look to buy at the price thresholds that lenders will allow them to borrow,” Melling pointed out.
“As our research shows, there’s quite a stark difference between this borrowing eligibility and the actual cost of a home and so, it’s hardly surprising that so many struggle to get that first foot on the ladder, or worse, are completely priced out of the market.”