UK renters five times more likely to struggle financially than homeowners

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UK renters are being squeezed by the cost of living crisis, with new official data showing they are five times more likely to struggle financially than outright homeowners.

The chances of renters facing financial vulnerability were 4.7 times greater than for those who own their homes without a mortgage, according to a study by the Office for National Statistics released on Friday.

The ONS’s criteria for measuring financial vulnerability includes being unable to afford an unexpected but necessary expense of £850, borrowing more than usual, struggling to meet energy bills and not being able to save.

David Ainslie, ONS principal analyst, said: “Today’s analysis adds to our work identifying inequalities in society and how certain groups have been more affected by the increased cost of living than others.”

The findings come as UK rental prices rose at an annual rate of 5 per cent in May, the fastest since the series began in 2016.

As many as four in 10 renters reported difficulty in meeting their rent payments, according to the analysis, which used data from February 8 to May 1. This compared with three in 10 mortgage holders who said they were struggling to afford their payments.

Renters were also more likely than mortgage holders to have cut spending on groceries and essentials, run out of food, be behind on energy payments or have a direct debit that they are unable to pay, the study showed.

The pain of the cost of living crisis was “feeding into the housing market with mortgage rates soaring and causing knock-on consequences in the private rented sector”, said Paul McGuckin, an analyst at independent consultancy Broadstone.

The raised exposure of renters’ to some form of financial vulnerability may reflect that, on average, renters spend 21 per cent of their disposable income on rent, according to the ONS. This is higher than the 16 per cent mortgage holders spend on their mortgages.

In the two weeks to June 9, renters were more likely find their payments had increased than mortgage holders, at 42 per cent and 32 per cent, respectively, separate ONS data included in Friday’s release showed.

While interest rates have been climbing since the end of 2021, many fixed-rate mortgage borrowers have so far been insulated from these rises as their contracts have not yet expired.

But earlier this week, the Bank of England calculated that 1mn households faced mortgage payment increases of £500 a month or more by the end of 2026, with another 6mn expecting rises up to that amount.