Renters are amongst the three groups likely to suffer worst as the cost of living crisis unfolds, an analyst has warned.
Sarah Coles, personal finance analyst at business consultancy Hargreaves Lansdown, says: “Renters, parents and divorcees are set to face horrible challenges as prices rise.
Those on the lowest incomes were most likely to struggle, but those who rent a property, have children living at home, or are trying to recover financially after a divorce also face a real risk of hitting a brick wall financially after massive bill hikes.”
The latest Hargreaves Lansdown Savings and Resilience Barometer, a measure of personal finance produced with Oxford Economics, found that fewer than one in five people on the lowest incomes have enough money left over at the end of the month to be comfortable.
Specifically, three in five renters don’t have enough wiggle room in their budgets to face price rises with confidence, and single people are half as likely to be resilient as couples.
Those with outstanding mortgages have more than those paying rent, according to Cole, who says rents absorb a much larger proportion of income – at 31 per cent compared to the 18 per cent that mortgage holders pay.
Parents with children living at home, meanwhile, face enormous drains on their incomes, from the very early years of high childcare costs to the later years when having teenagers at home essentially means funding the lifestyles of extra adults.
Cole adds: “Divorce hits hard, because suddenly you are funding two households from income that used to fund one. The SL Savings and Resilience Barometer found that single people generally struggle to have cash left over at the end of the month. Divorcees, meanwhile, may well be reeling from the expense of the divorce process, as well as having to fund a new home, and rebuild their finances.”
The data also showed that prices have already started increasing, and that people are having to cut back – almost a third were having to spend less on the essentials.
In the latest report, covering January and February, the biggest rises people noted were in food costs, energy bills and fuel.
Some 51 per cent of those who noted rising prices said they were coping by spending less on non-essentials, 36 per cent were shopping around more, 34 per cent using less energy and 31 per cent spending less on essentials.