Renters and under-35s far more likely to struggle financially
Renters and under-35s are much more likely to struggle financially than homeowners and retirees, ONS says
- Homeowners with a mortgage are twice as likely to be financially vulnerable
- 1 in 20 adults reported running out of food and being unable to afford it
- Report highlights continued impact of inflation and interest rates on households
Renters are nearly five times more likely to experience financial vulnerability than those who own their homes outright, a new ONS report revealed.
Despite rapidly rising interest rates, renters are much more at risk than those who own their homes with a mortgage – who are twice as likely as those who own outright to struggle financially.
The ONS said young people are more likely to get into financial trouble, with those aged 25 to 34 being 3.4 times more likely than those aged 75 and over.
According to the latest data from the Living Cost and Food Survey, renters generally report spending a higher proportion of their disposable income on rent (21 percent) than mortgage holders on their mortgage (16 percent).
But the research was conducted before mortgage rates started rising recently.
In the past two weeks, 1 in 20 adults reported running out of food and being unable to pay.
It highlighted those most at risk of struggling in the cost of living crisis.
Disabled adults are twice as likely to become financially vulnerable compared to non-disabled adults.
The figures showed that more than a third of adults say they are currently finding it difficult to pay their mortgage or rent.
About 4 in 10 (43 percent) renters said it was difficult to pay their rent, and about 3 in 10 (28 percent) mortgage holders said it was difficult to make their payments.
The research was conducted between February 8 and May 1, 2023, before the rapid rise in interest and mortgage rates over the past month.
Mortgage holders will face an even greater financial blow if they take out a new fixed loan after this.
Millions of homeowners face a rate of less than 2 percent for a much higher fixed deal. Rents are also rising because landlords are faced with higher mortgage costs and supply remains tight.
Lenders saw an increase in the number of customers defaulting on their mortgages in the three months to the end of June, and expect more borrowers to default in the coming months.
The Bank of England made its thirteenth successive rate hike last month after stubbornly high inflation prompted the Monetary Policy Committee to press ahead with its efforts to bring the rate down.
Two-year fixed mortgage rates have reached a 15-year high, surpassing the level reached at the height of the mini-budget fallout last October.
The current two-year average fixed interest rate is now 6.78 percent, according to Moneyfacts, and the market expects interest rates to rise further before the end of the year.
As such, nearly half of adults (48 percent) who currently pay rent or a mortgage reported that their payments had increased in the past six months.
Inflation continues to hammer household budgets as rising costs outstrip incomes, leaving many in the red and without essentials.
In the past two weeks, 1 in 20 adults reported running out of food and being unable to pay.
This figure rises rapidly for those receiving aid from charities to nearly half – 45 percent. And for those receiving some form of benefit or financial aid, it’s 21 percent.
Multi-ethnic, black and black British adults are also disproportionately affected.
In a more recent survey, 92 per cent of adults see cost of living as a major issue facing the UK and 60 per cent say their cost of living has increased compared to a month ago.
Households struggle to afford basic items as inflation continues to hammer budgets
Overall, about 14 percent of renters ran out of food in the past two weeks, compared to 3 percent of mortgage holders.
And 9 percent among adults in the bottom quintile of personal annual income compared to just 1 percent of those in the fifth and top quintile.
Laura Suter, head of personal finance at AJ Bell, says: ‘The figures show how difficult some households are finding this protracted cost-of-living crisis, with around 2.65 million UK adults running out of food and unable to afford it. more in the past two weeks.
“What we are seeing emerge is a split society: those facing higher rent or mortgage costs due to rising interest rates are much more likely to experience financial frailty, compared to older and wealthier people who simply own their own homes and are therefore protected against the negative effects of interest rate increases.’