A new survey has highlighted how the soaring cost of renting has left many tenants unable to get on the housing ladder.
According to the first Momentum UK Household Financial Wellness Index, a growing number of UK adults are unable to purchase a home because of rising rents, leading them to suffer from poorer levels of financial wellness.
The index found that renters are half as likely to be able to cover their monthly outgoings as homeowners
Financial wellness is drastically split between homeowners and non-homeowners with renters suffering due to a lack of assets and an inability to plan long-term effectively.
Those with a mortgage average 71/100 Index points, and those who own outright average 74/100. Meanwhile, those in rental accommodation average financial wellness scores of 62/100, 62/100 and 60/100 points among private renters, housing association tenants, and local authority renters, respectively.
Ferdi Van Heerden, CEO of Momentum UK, said: “The financial hardships being faced by renters are making it impossible for them to build the deposit necessary to get their foot on the property ladder. Soon we will see a situation where only those who already own or inherit property will be able to own a home.
“Private renting is on the increase from 6% of the population in 1988 to 16% in 2014. By contrast, the prevalence of mortgaged home ownership among under 40’s is lower than in 1977, when the Right to Buy was introduced to address just such an issue.”
There are fears that first-time buyers are being squeezed out of the market due to the dwindling supply of suitable homes and ballooning property prices.
Tougher affordability checks from lenders and rising house prices have made it increasingly difficult for first-time buyers with smaller deposits to get on the property ladder.
Low interest rates combined with the economic recovery have done little to reduce the need for rented housing, while house price inflation ahead of wage growth has pushed property prices out of reach for many.
A recent study by the Resolution Foundation found that the housing ladder is rapidly disappearing for most young working households on modest incomes. According to the research, over-45s now account for three-quarters of all home owners and that only one in 10 young people are likely to be on the property ladder in 2025.
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