New research has revealed that private renters are in such a poor state of financial health they are twice as likely as mortgage borrowers to have no savings. Many are even having to cut back on basic essentials such as food to get by.
According to financial services firm Momentum UK, almost one in three (31%) private renters have less than £100 in savings, compared to one in seven (15%) people with a mortgage.
Mortgage borrowers are also twice as likely (37%) as private renters (16%) to view their income as sufficient.
Private renters are sending roughly half their salary to their landlord each month and recent research 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 clearly hitting disposable incomes, with one in five (19%) private renters having cut back on food in the last year to get by, compared to one in 10 (11%) mortgagors.
A further 19% of renters having gone without a holiday in the same period, compared to 15% of those with a mortgage.
While those stuck in the rental trap are experiencing a lower standard of living currently, they may also face a tougher time in later years. Three in five (60%) private renters currently do not have a pension, compared to just over a quarter of mortgagors (27%).
According to recent figures, homeownership is in decline. More than four million households in the UK now rent their home from a private landlord, nearly twice as many as 10 years ago.
Within England, homeownership fell to 62.9% last year, the lowest percentage since 1985 and eight points lower than the peak in 2003.
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.
“For those who have only recently moved into private rented accommodation and are not used to living on a budget, there are now apps and online tools available which can help to make your money go as far as possible.”
