Renters are half as likely to be able to cover their outgoings as homeowners
The Momentum UK Household Financial Wellness Index, commissioned by Momentum UK and conducted by the University of Bristol’s Personal Finance Research Centre is the first research of its kind to look at the overarching financial wellness of the UK.
The Index revealed that 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.
The lack of significant difference in score between private renters and those in social housing, indicates that, even though they have relatively higher incomes, private renters are being made financially ‘unwell’ by their living situation.
Renters’ day-to-day spending suffers
The Office for National Statistics’ Economic Review estimated that renters spend approximately 20% of their income on rent, with this rising to 25% for private renters. This has risen from 10% over the last three decades. These costs are also evidenced in the Index’s findings which found that renters are half as likely as home owners to feel that their income will cover their monthly outgoings. Renters are also half as likely to feel comfortable with their current standard of living. Also, double the amount of renters missed a minimum repayment on a credit card, loan or other debt in the last year.
Renters also are far less prepared to deal with unforeseen money worries – being half as likely to have funds put away for a rainy day and twice as likely to not be able to meet an unexpected expense without having to borrow money.
Ferdi Van Heerden, CEO of Momentum UK says: "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.”
The long term effects of renting
Despite the fact that renters are just as likely to budget and monitor their day-to-day spending as homeowners, they are far more likely to see their long-term financial prospects suffer due to the effect that renting has on their income. According to the Index, renters are twice as likely to have no savings, insurance or pension products in place. They are also twice as likely as homeowners to have no provisions in place for their retirement. The long-term reality of living as a renter has also had an effect on the financial confidence of non-homeowners, prompting fears for both their short and long-term financial futures.