Those families who rent their homes are less likely to have savings or protection products to protect them against financial shocks, according to Aviva’s latest Family Finances Report.
25% of private renting families do not have any savings or investments, equating to almost 650,000 people that may struggle to cope with any unexpected expenses. 22% (569,000) private renting families do not hold a savings account.
This compares to just 11% of homeowning families with a mortgage that have no savings or investments and 5% of those who own their home outright. Only 17% of mortgaged families do not have a savings account, falling to 16% of those who own their home outright.
Renting families are also less likely to have insurance in place to provide financial cover should they become ill or die. Only 20% of families who rent privately have life insurance, compared to 25% who own their home outright and 48% who own their home with a mortgage. Similarly, 4% of renting families have critical illness cover and only 3% have income protection.
The findings follow a significant rise in the proportion of families with dependent children living in rented accommodation, according to Aviva’s analysis of data from the Office for National Statistics (ONS).
In 2013, 17.7% of couples with dependent children were private renters. This rose by 3.6 percentage points to 21.3% in 2014. The same trend is true for single parents: 31.9% were in rented accommodation in 2014, compared to 30.2% in the previous year: a rise of 1.7 percentage points.
As a result, there were 1.5 million families with dependent children in rented accommodation in 2014: a 19% rise since 2013 (1.3 million).
Louise Colley, managing director of protection at Aviva, said: “Renters might not have a mortgage to pay, but they still have financial obligations like bills and monthly rent. Not having a savings cushion in place means unexpected costs could make day-to-day living a struggle, while a lack of income protection could be disastrous should they become ill and unable to work.
“With growing numbers of parents in rented accommodation, it’s vital all families think about the future and put financial plans in place, regardless of whether they are a homeowner or not.”
Aviva’s Family Finances report also reveals renting families are less happy with their homes. While 32% of homeowning families with a mortgage feel emotionally attached to their home, this falls to just 18% of families who are private renters. The take-up of home contents insurance is also lower amongst renting families, with 42% owning this product compared to 81% of families with a mortgage.
Unsurprisingly, the majority of renters have ambitions to move on. Only 4% of privately renting families want to stay in their current home for the rest of their lives (versus 20% who own their home with a mortgage) and 76% would like to become homeowners in the future.
However, the need to save for a deposit is the main barrier to the property market for today’s renters: 30% of families who rent privately say they cannot afford the deposit and fees associated with purchasing a house, equating to 775,800 households.
Add to this the 574,500 social renting families (30%) who say the same, and 1.35 million families feel trapped in the rental market because of deposit requirements.
Social renting families are more likely to say the general cost of living is making it too hard to save up for a house (26% versus 22% of private renters), although those who rent privately are more likely to struggle with high house prices (21% vs 13%).
13% of private renting families are unable to save for a house because their rent is too expensive. In June 2015, private rental prices rose 2.5% annually – the biggest increase seen in more than two years.
Colley added: “Homeownership has always been a major ambition for British families and most renters would like to own their own home in the future. However, with rents at record highs, many are struggling to save enough for a house deposit.
“It’s easy to get stuck in a cycle of paying rent and bills and not prioritising saving, but even saving just a small amount each month will eventually add up. Government schemes such as the upcoming Help to Buy ISA can also help families to build on the amount they have saved themselves.”