Momentum UK’s latest Financial Wellness Index has found that private renters go on fewer holidays, save less money and are more likely to make forced cutbacks than those with a mortgage.
The report found the average renter was in far worse financial health than someone with a mortgage, a worrying sign given that the number of private renters in the UK is rising fast and homeownership is in decline.
According to Momentum UK’s Index, 31% of private renters have less than £100 in savings, compared to 15% of people with a mortgage on their home. Mortgage borrowers are also twice as likely (37%) as private renters (16%) to view their income as sufficient.
Private renters currently ‘send 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 19% of private renters having cut back on food in the last year to get by, compared to 11% of mortgagors, and 19% of renters having gone without a holiday in the same period, compared to 15% of those with a mortgage.
The living standard divide between private renters and people with a mortgage on their home
| Action taken in the last year | Private renters | People with a mortgage on their home |
| Cut back on food to get by | 19% | 11% |
| Cut back on heating to get by | 11% | 4% |
| Cut back on essentials to get by | 14% | 4% |
| Cut back on non-essentials to get by | 30% | 21% |
| Sold possessions to earn extra cash | 8% | 6% |
| Borrowed money from friends or family | 14% | 7% |
| Increased credit card limit or overdraft | 6% | 3% |
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. 60% of private renters currently do not have a pension, compared to 27% of mortgagors.
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.”