Financial wellness is “drastically split” between homeowners and non-homeowners with renters suffering due to a lack of assets and an inability to plan long-term effectively.
A growing number of UK adults are unable to purchase a home and are suffering due to a lack of assets and an inability to plan long-term effectively, research from Momentum has claimed.
An index commissioned by Momentum UK and conducted by the University of Bristol’s Personal Finance Research Centre suggested that financial wellness is “drastically split” between homeowners and non-homeowners with renters suffering due to a lack of assets and an inability to plan long-term effectively.
Those with a mortgage average 71/100 Index points, and those who own outright average 74/100.
Meanwhile, those in rental accommodation average financial wellness scores of 62/100, 62/100 and 60/100 points among private renters, housing association tenants, and local authority renters, respectively.
Furthermore, the lack of significant difference in score between private renters and those in social housing, indicates that, even though they have relatively higher incomes, private renters are being made financially ‘unwell’ by their living situation.
Ferdi Van Heerden, chief executive of Momentum UK, said: "The financial hardships being faced by renters are making it impossible for them to build the deposit necessary to get their foot on the property ladder.
“Soon we will see a situation where only those who already own or inherit property will be able to own a home.
“Private renting is on the increase from 6% of the population in 1988 to 16% in 2014. By contrast, the prevalence of mortgaged home ownership among under 40’s is lower than in 1977, when the Right to Buy was introduced to address just such an issue.”
Despite the fact that renters are just as likely to budget and monitor their day-to-day spending as home owners, they are far more likely to see their long-term financial prospects suffer due to the effect that renting has on their income.
According to the Index, renters are twice as likely to have no savings, insurance or pension products in place.
They are also twice as likely as homeowners to have no provisions in place for their retirement.
The long-term reality of living as a renter has also had an effect on the financial confidence of non-homeowners, prompting fears for both their short and long-term financial futures.
Van Heerden added: "If we do not address the UK’s rental trap, we are effectively creating a lasting social divide between the ‘haves’ and ‘have nots’. We cannot simply assume that the current system will resolve this issue and action must be taken to address this.”
