People in the UK who rent in the private rented sector are twice as likely as mortgage borrowers to have no savings and spend roughly half of their salary on rent each month, new research has found.
Private renters also go on fewer holidays and are more likely to make forced cutbacks than those with a mortgage, according to the latest index from financial services firm Momentum UK.
Overall 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 home ownership is in decline.
The research found that 31% of private sector tenants have less than £100 in savings compared to 15% of people with a mortgage on their home. While 37% of mortgage borrowers view their income as sufficient just 16% of tenants do.
While tenants currently spend around half of their earnings on rent the report says that with recent research suggesting that rents will increase by an average of 25% over the next five years this is faster than the forecasted rate of house price growth, leaving tenants facing even more of a financial burden.
It also suggests that rising rents are already hitting disposable incomes with 19% of tenants admitting to cutting back on food in the last year to get by, compared to 11% mortgagors, and 19% of tenants not having a holiday compared to 15% of those with a mortgage.
The research also found that 11% of tenants said they had cut back on heating compared to just 4% with a mortgage, 14% had borrowed money from friends or family compared to just 7% and 30% cut back on non-essentials compared to 21% of those with a mortgage.
The financial outlook further ahead is also weaker for those who rent with 60% not having a pension compared to 27% of people with a mortgage who do not have a pension.
Dominic Baliszewski, director of consumer strategy for Momentum UK, pointed out that while overall tenants see half of their earnings going on rent this figure is likely to be higher for those living in London.
‘With home ownership in decline, the number of people facing these financial challenges and seeing their living standards fall is only going to grow,’ he added.
