42% of renters cannot afford to save deposit for own home

Published by Max Salsbury for 24dash.com in Housing and also in Finance

New research has found that 42% of renters cannot afford to save a deposit for their own home.

Meanwhile, nearly half of renters claim they would happily rent long-term if there wasn't so much pressure to get on the property ladder.

More than a third (35%) of renters claimed that they are currently saving for a deposit. However, 42% have saved less than £5,000. The average deposit saved is £12,125 - just 7.3% of the average UK house price of £165,738.

Most lenders ask for at least a 20% deposit, meaning that with the average house price at £165,738, a deposit of £33,000 is required. The figure is £20,000 more than the average renter has managed to save.

The research, by website spareroom.co.uk, found that 31% are spending more than half of their after-tax income on rent.

Up top of this, household bills are also rising, causing the erosion of deposit funds. 15% said they regulary dipped into their savings to cover rent or bills. Another 20% admitted using deposit savings to pay for holidays.

The under-30s are most likely to dip into their savings, with 60% admitting to doing so.

The research suggests that, though Britain has traditionally been a nation of property buyers, nearly half of present renters do not consider renting a bad thing, with 48% saying they would be happy to rent long-term.

However, the survey also reveals that with rents rocketing in the past year, UK renters have seen the percentage of their wages spent on rent increase significantly.

Just over one in seven (13%) of respondents spend more than two thirds of their take-home pay, after tax and deductions, on rent, while one in five (20%) say half to two thirds of their pay goes on rent.

Although eight out of ten (79%) of those polled describe themselves as employed professionals, 39% blame the huge deposit – typically around 20-25% – required by lenders as the main reason preventing them from being able to

Up to 17% believe it will take them longer than a decade to be in a position to buy, while another 19% say they can never envisage getting on the property ladder.

Just over a quarter (26%) are fairly optimistic, saying it will take them between two and four years, whilst almost a third (30%) say it will take five to ten years.

Matt Hutchinson, director of SpareRoom.co.uk, said: “As a nation, we have always aspired to be homeowners at some point in our lives, but how realistic are those aspirations? In truth, home ownership may simply never be attainable for future generations, and peoples’ attitudes towards renting long-term may need to change.
 
“A significant proportion of the people we polled expect to live in rented accommodation for at least five years, and many believe it will be much longer than that. If attitudes towards home ownership relaxed in the UK, people might even be prepared to rent rather than buy for the long-term, as is the norm in parts of Continental Europe.
 
“The facts speak for themselves, soaring living costs mean it’s a struggle for many households just to keep their heads above water each month, let alone have enough spare cash to put aside towards a deposit. The survey shows that even those who are squirreling away funds have not managed to save anywhere near enough to buy the property they want.
 
“What’s clear is that something has to change. House prices need to fall, mortgage lenders need to offer more assistance to first time buyers with higher loan to value mortgages, and the Government has to accept there is a need for more affordable housing to purchase and affordable rental properties available privately or through housing associations.”