English Housing Survey – the real cost of renting later in life

The Department for Levelling Up, Housing and Communities has published the initial findings of the 2024/25 English Housing Survey on demographics and household resilience.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Renting later in life is becoming far more common – including huge numbers of people stuck in rental properties after they have had children, and some still handing over a huge chunk of their income to a landlord in retirement.

“Those aged 45-54, made up 18 per cent of households who are privately renting – up from 15 per cent a year earlier. Unfortunately, renting later comes at a horrible cost.

“The rise of mortgage rates in 2024/25 means that on average, people spent more on the mortgage than they did on rent.

“However, it’s not quite that straightforward, because not only is renting more expensive than a mortgage in London, but when you look at payments as a percentage of income, things change drastically.

“Those with mortgages tend to have higher incomes, so on average, people with a mortgage spent 19 per cent of their household income on mortgage payments, whereas private rental payments, excluding housing support, made up an eye-watering 39 per cent of income.

“And the costs aren’t just financial. Renters also tend to move far more often, which can cause problems for everyone, especially if rising rents force them into a continual cycle of renting smaller homes, further from work.

“It also raises issues for the 32 per cent of private renters with children (up from 30 per cent in 2022/23), who risk having to uproot them from school when their tenancy comes to an end.

“As a result of the fact that rent is so expensive, tenants have their budgets stretched horribly thin.

“There’s a real struggle to make ends meet, let alone save for the future, which is one reason why only 52 per cent of them had savings. It makes saving up for a property deposit incredibly difficult.

“This reflects the findings of the HL Savings and Resilience Barometer, which found renters were less likely to have money left over at the end of the month, and less likely to have savings to fall back on.

“On average, they have just £39 left at the end of the month. The resilience gap between renters and owners tends to grow as we get older, which is why Generation X renters have even less – at £28.

“The combination of over-stretched renters and higher house prices means the average age of a first-time buyer has hit 34. It’s hardly surprising it takes so long to save up when you consider that the average deposit (median) was £36,500.

“It means the door is closing on all sorts of would-be buyers: only 58 per cent of private renters ever expect to buy. It’s far more difficult to buy alone: only 29 per cent of first-time buyers were one-person households.

“It also means you need to be a higher earner. People with mortgages are concentrated in the two fifths of people with the biggest incomes.

“It means people are making compromises with real consequences. They’re having to pay the mortgage for longer, so of those first-time buyers who had a mortgage, almost two thirds (62 per cent) had a repayment period of 30 years.

“They’re also having to buy with a deposit that makes up a smaller percentage of the property value. Over half of first-time buyers (59 per cent) paid a deposit of less than 20 per cent, and 16 per cent paid less than 10 per cent. Unfortunately, borrowing more means facing higher mortgage payments.

“Meanwhile, owning a smaller stake in the property means that if we face a period of falling prices, more new buyers may risk falling into negative equity.

“New buyers need all the help they can get, and the Bank of Mum and Dad has been playing an essential role. They (plus other family and friends) helped 31 per cent of first-time buyers onto the property ladder.

“For those who can afford to help, it’s brilliant to be able to give your offspring a good start in life. It’s also often a far more positive stage to help than the six per cent who have had to wait for an inheritance to get them onto the property ladder.

“However, parents need to be aware of the costs involved. If they are dipping into the equity in their home, it may well mean paying their own mortgage for longer.

“If they’re spending their savings, they need to be sure they still have enough for emergencies, and if they’re spending a lump sum from their pension, they need to be aware of the impact on their retirement income.

“Because while we always want to help our offspring, it’s not going to help anyone if we damage our own financial resilience irreparably in the process.

“Some buyers will be able to get support from the government through a Lifetime ISA.

“The government is consulting on replacing this, but if you already have a LISA and you’re planning to buy relatively soon, topping it up with £4,000 this year will see another £1,000 bonus from the government.”