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One in two tenants fail government ‘financial resilience’ test

One in four people don’t have enough savings to cover a 25 per cent drop in earnings - and that rises to almost one in two people who privately rent. 

The ‘cover 25 per cent drop’ measurement is the one used by the government’s Office for National Statistics to assess ‘financial resilience’ in household budgets.

Amongst others measured this way, 55 per cent of single parents fail to have enough, and 34 per cent where the main earner has a long-term illness or disability.

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Rohit Kohli, director at independent broker The Mortgage Shop, says: "The ONS report paints a sobering picture of the UK's current economic landscape. Vulnerable groups - notably disabled adults, renters and single parents - are disproportionately struggling. Despite a fall in inflation, the cost of essentials has surged, with some items seeing over a 25% price increase in two years. This trend strains household finances, particularly for necessities. The mortgage sector hasn't fully felt the impact yet, but with a tough winter ahead, many face harsh choices between heating, eating or paying their mortgage or rent.”

Sarah Coles, head of personal finance at business consultancy Hargreaves Lansdown, adds: “The ONS measures resilience primarily through our ability to weather the storm if we lost 25 per cent of our income. However, it also looks at a number of other areas. 

“Among renters, 53 per cent can’t afford a bill out of the blue and 13 per cent have run out of food and not been able to afford to replace it. Some 55 per cent have trouble paying their rent – compared to just 34 per cent of those with a mortgage. And things have got much worse as rents have risen. The percentage of renters who are struggling has risen from 42 in the spring to 55 per cent now.”

And Coles warns that according to her calculation, by the summer some 230,000 of those who are ‘at risk’ of falling into arrears will have cash savings that cover less than three months of essential spending – making them ‘high risk’. Plus an additional 470,000 will also have unsustainable spending, so they’re at ‘critical risk’. 

“It means that the cost-of-living crisis for those with a mortgage is likely to last even longer” she cautions.

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    Do these people actually get paid to state the obvious?

    They haven't bothered with the interesting bits. Why can't 53% of renters afford a bill out of the blue? How big is the bill? Have they spent their money on unnecessary luxuries such as cigarettes, false nails, hair extensions, the latest iPhone, designer trainers, takeaways, nights out, etc? Some people are undoubtedly struggling but a far larger number are making some very bizarre spending choices.

    People who rent tend to be younger and in lower paid jobs than people with mortgages. That should be obvious to these so called experts. It doesn't mean they will always be young and in a low paid job. Learning how to budget and take responsibility for making sure the important stuff is paid would be a very good life skill to learn

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    As usual you have hot the nail on the head. Years ago people were advised to have 6 months living costs in savings in case of losing their job etc. These days if people have any spare money they just spend it, and they run up credit to the max as well.

     
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    I have met people who just couldn't save. As soon as they received their benefits they would spend it. They couldn't even plan till their next payment day. Once they got their benefits they would spend it on silly things like takeaways and treats, then struggle for a few days till the next payment day. It is so bad they would go to the supermarket at midnight when they could spend their latest payment.

     
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    I was in that situation in my younger years, especially just after I started my own business. Did I bleat, no, I took out insurance just in case!

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