Renters’ resilience dropping - analyst’s warning

Renters are less financially resilient than recent remortgagers according to an analysis by business consultants Hargreaves Lansdown.

It says over two thirds have poor financial resilience, compared to a quarter of remortgagers; and only 43 per cent of renters have enough emergency savings, compared to 71 per cent of mortgagees and 87 per cent of those who own outright.

At the end of the month, renters have an average of £193 left, compared to mortgagees with £353 and outright owners with £398.

Hargreaves Lansdown says just 18 per cent of renters are on track for a moderate retirement income, compared to 55 per cent of mortgagees and 51 per cent of outright owners.

Renter incomes average £31,617 per household, compared to £49,279 for outright owners and £57,818 for those with a mortgage.

Sarah Coles, head of personal finance at the consultancy, comments: “Renting ruins your financial resilience even more than having to remortgage at a time of sky-high interest rates. Life was already tough enough for tenants, but with average rents up around 10 per cent in the past year, millions are having the life squeezed out of their finances altogether.

“Average rents tend to be lower than average mortgage payments – and private rents tend to be similar to mortgage payments - but renters are on lower average incomes.”

She claims that private renters have around £193 left at the end of the month, and they save just four per cent of their income, compared to those with mortgages who save five per cent and have £353 left at the end of the month. 

As a result, fewer than half of renters have enough savings put aside – compared to almost three quarters of mortgagees.

Coles continues: “But it’s not just their short-term resilience that’s suffering. They’re so busy making ends meet that they’re falling worryingly short when it comes to putting money aside for the future too. 

“Renters will always struggle when it comes to making plans for later life. Being on lower incomes makes it harder for them to put money away. They also need to save more, because they face much higher costs in retirement. 

“Homeowners can plan to pay off their mortgage by the time they retire, whereas renters will have a drain on their finances for the rest of their lives.”