Renters facing greater difficulties than homeowners

31st July 2023

While the UK’s current high-interest rates have gathered plenty of news coverage for their challenging impact on homeowners, UK renters are facing even greater levels of difficulty.

Recent headlines related to interest rates and the cost of living have focused a lot on the homeowner market and the tough changes many are, or will soon be, facing, but renters arguably face an even more difficult environment. In the 12 months to June 2023, UK private rental prices rose 5.1%, up from a revised 5.0% in the 12 months to May, with prices skyrocketing across each country and all English regions. Northern Ireland (9.6%), Wales (5.8%) and Scotland (4.6%) all saw the highest rates of increase, with the lowest overall rises in the North East of England (4.4%) and South East of England (4.6%).

Over a third (36%) of social renters are found to be ‘in serious difficulties’, with nearly a quarter (23%) of private renters also falling into this category. This compares with 13% of mortgagors and 5% of outright homeowners. Single parent households in rented housing were more likely than other types of family to be in difficulty.

For all UK mortgagors, in the last six months 13% have remortgaged due to their fixed-term ending and seen their housing costs increase, while 17% also saw increases due to having a variable or tracker rate. Whereas 37% of private renters and 67% of social renters have seen theirs increase. In the last month, 13% of social tenants said they had not eaten for a whole day on three or more occasions because there wasn’t enough money for food, as had 8% of private tenants.

While the problems extend nationwide, some of the issues acutely affect London renters. In the 12 months to March 2023, the median monthly private rental for England was £825, while in London it was £1,500. For a single room with shared facilities, the London median monthly rent is 51.1% higher than the rate for all England. For two bedrooms, the London rate is 87.5% higher. London Councils estimate that 166,000 people are homeless and living in temporary accommodation, a figure equivalent to the total number of residents in a city like Blackburn or Oxford. London Boroughs are collectively spending more than £52 million a month on this.

Managing an economy is always a balance and the strategy of raising interest rates to lower inflation is done in full awareness that it should increase the cost of payments on things like mortgages, to reduce spending overall. But of course this also adds additional pressure on those who rent, with many already paying much higher amounts for rent than those with mortgages.

This in turn creates an impossible balancing act, meaning many are struggling to stay financially sound. With all lines of people’s expenditure column rising and incomes unable to match them, the UK’s immediate financial outlook is troubling. But the principles of Financial Wellbeing still apply and always will. Even in the most challenging scenarios, people can still take small steps to review, take stock and retain as much control as possible of their financial situation.

Michelle Highman, Chief Executive of The Money Charity