There will be a lasting social divide between the ‘haves’ and ‘have nots’ as a consequence of the country’s growing ‘rental trap’ unless swift action is taken to rectify the situation, a new report suggests.
An increasing number of people in the UK are unable to buy a home, leading them to suffer from poorer levels of financial wellness, according to the first ever Momentum UK Household Financial Wellness Index, commissioned by Momentum UK and conducted by the University of Bristol’s Personal Finance Research Centre.
This is the first research of its kind to look at the overarching financial wellness of the UK. The Index showed that there is a huge disparity between homeowners and non-homeowners when it comes to financial wellness with renters suffering due to a lack of assets and an inability to plan long-term effectively.
“The financial hardships being faced by renters are making it impossible for them to build the deposit necessary to get their foot on the property ladder. Soon we will see a situation where only those who already own or inherit property will be able to own a home,” said Ferdi Van Heerden, CEO, Momentum UK.
Private renting is on the increase from 6% of the population in 1988 to 16% in 2014. By contrast, Van Heerden points out that the prevalence of mortgaged home ownership among under 40’s is lower than in 1977, when the Right to Buy was introduced to address just such an issue.
Many renters are seeing their long-term financial prospects suffer as a result of the impact that high rents have on their income.
According to the Index, renters are twice as likely to have no savings, insurance or pension products in place. They are also twice as likely as homeowners to have no provisions in place for their retirement. The long-term reality of living as a renter has also had an effect on the financial confidence of non-homeowners, prompting fears for both their short and long-term financial futures.
“If we do not address the UK’s rental trap, we are effectively creating a lasting social divide between the ‘haves’ and ‘have nots’. We cannot simply assume that the current system will resolve this issue and action must be taken to address this,” Van Heerden added.