Rental arrears figures rising

14th October 2021

The Department for Levelling Up Housing and Communities has released the third wave of the Household Resilience Survey which has indicated that renters’ resilience has been pummelled by the pandemic, and has highlighted the new threat of inflation.

The research found that 7% of private renters were behind on the rent in April-May (up from 3% before the pandemic), and 9% expect to fall behind in the next three months, whilst 10% of households were behind with at least one household bill. The figures rose to 17% for private renters and social renters 35%.

11% of households had taken on new credit – although private renters and those with mortgages were equally likely to have done so – at 15%. Whilst 22% have used their savings to pay their rent or mortgage, including 29% of private renters and 19% of mortgagees.

The figures also showed that between the end of 2020 and May 2021, 23% had eaten into their savings.

Commenting on the figures Sarah Coles, Personal Finance analyst, Hargreaves Lansdown said  “The financial impact of the pandemic has been desperately unequal, and those who were hit hardest are still being pummelled by the effects of the crisis. There are some signs that life is returning closer to normal for some, but there’s a risk that this may not give them the space they need to rebuild their resilience, because another financial nightmare is lying in wait. When homeowners were asked why they were struggling to keep up their mortgage payments, 14% of people blamed rising prices. Higher inflation could mean we’re not past the worst of the crisis at all.

“Renters are reeling from the pandemic. They’re more likely to have missed payments for housing costs, to be behind on bills or have spent their savings on bills, and 15% have taken on new credit to get by. This owes much to the fact that renters live far closer to the edge of their finances at all times, because they have to spend so much of their income on rent. On average, private renters spend 34% of everything they earn on rent – while those with a mortgage spend just 18%. It means a drop in income leaves them with nowhere to go. It’s why when asked what their biggest problems were, they named a drop in hours as the key problem, followed by furlough and unemployment. It didn’t help that more younger people rent, and they were particularly likely to have had their hours and pay affected during the pandemic.”

“But the resilience gap isn’t just down to home ownership, there’s still a significant minority with mortgages who are struggling. The percentage of people in mortgage arrears has risen from 0.5% to 2% since the onset of the pandemic, and another 10% said it was difficult to keep up mortgage payments – up from 4% before the pandemic.”

“These financial struggles have been dragging people down for 18 months. The more positive news is that since the survey was last done in December 2020, things have improved for some. Just over half said their income hadn’t changed over that period, but more said it had increased than decreased, and although 23% of people saved less, 22% actually saved more, which rose to 29% among those with a mortgage.”

“Unfortunately, there’s every chance that inflation could throw a spanner in the works. And while we’re struggling to get back on our feet, we also have to wrestle with rising prices across the board, that threaten to throw our budgets back into disarray, and the damage that’s already been done to our financial resilience could have an impact long after the next crisis abates. It’s not just everyday costs we’ve struggled with, people have also been forced to eat into savings and cut back pension contributions. Among renters it means more people can’t ever imagine buying a house of their own. At the outset of the pandemic 59% of private renters thought they would eventually buy, but now only 45% do.”