New government data shows tenants spend 28.8% of their income on the rent – up from 26.6% a year earlier and 25% five years earlier.
Meanwhile the percentage of direct debit failures (seasonally adjusted) has risen significantly to 2.21% – from 2.01% a year earlier and 1.68% five years ago.
This is despite the fact that the average monthly direct debit totals have only increased slightly – from £300.50 in July 2019 to £304.91 in July last year and £306.56 this July.
Sarah Coles, head of personal finance of Hargreaves Lansdown, says: “The white heat of the cost-of-living crisis may have cooled for an awful lot of people, but renters are still getting burned. And as more people further up the income ladder loosen the purse strings, they’re missing some vital bills. These weaknesses in people’s finances could come back to bite them.
“There’s no let up in the squeeze on renters. They’re now spending a far higher percentage of their income on keeping a roof over their head, and the proportion of their income they’re having to hand to the landlord is rising faster than at any other time in the past five years.
“Attention has been focused on the pressure on those with mortgages now that interest rates have risen, but compared to renters, they have nothing to worry about.
“The Hargreaves Lansdiown Savings & Resilience Barometer in July found that those who have remortgaged onto a higher rate between the end of 2022 and the middle of 2024 have an average of just £315 left at the end of the month – £95 less than those who are yet to remortgage. But compare that to renters – who have just £79 left at the end of the month.
“For those with mortgages, there’s light at the end of the tunnel, because the Bank of England is expected to cut rates again before the end of the year. For renters, meanwhile, there’s no such hope. Landlords are continuing to sell up – concerned about higher costs from more regulation and bigger mortgage payments. More recently, the trend has been exacerbated by landlords alarmed by the prospect that the government could hike capital gains tax in the Budget. It means more tenants chasing dwindling numbers of properties, so they’re having to pay through the nose to find a place to live.”
For all demographics, financial resilience remains spectacularly lumpy across the UK according to the consultancy.
Its Barometer shows that on average, just over half of households score ‘good’ or ‘great’ for their financial resilience, but this rises to 87% for the highest earners and plumets to just 3% for those households on the lowest incomes. However, these missed bills aren’t about lower earners not having enough money to make ends meet.
This data focuses on direct debits, and because the very lowest earners don’t tend to pay bills via direct debit as much as those on average incomes, it means that a growing number of more typical earners missed bills in July.
The percentage of direct debit failures remains relatively low overall, but it has risen significantly to 2.21% – from 2.01% a year earlier. Some 2.25% of direct debits for electricity and gas bills are failing, this is a record high since the start of 2019 and is higher than in 2022 when bills were much more alarming and inflation was rising ahead of wages.
