Rents in this country are now around half of tenants’ average take-home pay, according to a report on the state of so called Generation Rent.
New research, undertaken by the University of Bristol on behalf of financial services innovator Momentum UK, has found that the average renter is now in far worse financial health than someone who owns their own home.
The study revealed that private renters go on fewer holidays, save less money and are more likely to make forced cutbacks than those with a mortgage, due to greater affordability constraints.
According to Momentum UK’s Index, almost one in three (31%) of private renters have less than £100 in savings, compared to one in seven (15%) people with a mortgage on their home, while mortgage borrowers are also twice as likely (37%) as private renters (16%) to view their income as sufficient.
Researchers said that private renters currently ‘send roughly half their salary’ to their landlord each month and recent research by RICS suggests rents will increase by an average of 25% over the next five years, faster than the forecasted rate of house price growth.
The burden of rising rents is not being helped by the fact that many buy-to-let landlords are being offered no alternative but to increase rents in order to recoup losses caused by recent tax changes, including higher stamp duty costs, the scrapping of the ‘wear and tear’ allowance and planned changes to mortgage interest relief, which is set to be introduced next month.
With tenants paying the price of the government’s tax-grab, many are having their disposable incomes hit, which is rather worrying given that the number of private renters in the UK is rapidly growing.
More than four million households in the UK now rent their home from a private landlord, nearly twice as many as 10 years ago.
Dominic Baliszewski, director of Consumer Strategy for Momentum UK, said: “The average private renter loses around half of their pay cheque on rent at the beginning of each month, and for those living in London, it can be even higher. This not only limits their ability to save, but also means they have to cut back on expenses such as gym memberships, holidays and socialising just to get by.
“With home ownership in decline, the number of people facing these financial challenges and seeing their living standards fall is only going to grow. That’s why it’s so important that the government delivers on the pledges made in its housing white paper.”