Renters spend more on housing costs each month than homeowners

Renters face significantly higher housing costs than owner occupiers, according to the latest English Housing Survey.

Private renters spend 31% of their household income on rent each month, while those buying a home with a mortgage spend just 18%.

The English Housing Survey findings for 2020/21 come as our own research shows that rent increases hit a 13-year high.

The cost of renting a UK home outside London, now stands at £809 per month, according to our latest Rental Market Report.

The good news for potential buyers is that there has been a steep increase in the number of people getting on to the property ladder.

The number of first-time buyers in 2020/2021 reached 957,000. That’s over 130,000 more than the previous year.

A total of 61% of people in the private rented sector expect to be able to buy their own home at some point, according to the survey.

Of those, 35% expect to be able to step onto the property ladder within the next two years.

Why are renters paying more?

People in the private rented sector paid an average of £198 a week for their home. While people with a mortgage paid £174 a week.

Part of the discrepancy is caused by the fact that homeowners are currently benefiting from record low mortgage rates.

At the same time, private landlords are facing increased costs due to tax changes and new regulatory requirements. Some of these costs are being passed on to tenants.

Also, private sector rents reflect the current market rate, because rents are typically adjusted when tenants’ contracts are renewed.

Homeowners typically take around 25 years to fully own a property outright if they are buying it with a mortgage.

The owner-occupier figures include people who bought years ago when house prices were lower. This means their mortgage payments are lower than if they were buying today.

How many people are in private rented homes?

One in five people in England rent a home in the private sector, rising to 27% in London.

Younger people are more likely to rent, with 65% of people in the private rented sector aged under 45.

There has been an increase in older age groups who rent.

There are 11% of people aged between 55 to 64 letting in the private sector, double the proportion a decade earlier.

While, the number of people aged between 45 and 54 renting stands at 16%, up from 11% 10 years ago.

How did so many people buy homes this year?

The number of first-time buyers in 2020/2021 reached 957,000. That’s 131,000 more than in 2019/2020.

Many of these buyers will have taken advantage of the stamp duty holiday which ended in June.

The average first-time buyer was 32 when they got on the property ladder, rising to 34 in London, according to the survey.

First-time buyers put down a typical deposit of £44,294, while 62% opted for a mortgage term of 30 years.

The steep increase in first-time buyers is likely to reflect the amount of government support available for those getting on to the property ladder.

What government help is available to first-time buyers?

The Help to Buy equity loan is the flagship scheme which enables first-time buyers to purchase a property with just a 5% deposit.

The government then tops this up with a 20% equity loan, which is interest-free for five years.

In September, the government announced plans to deliver 57,000 affordable homes for first-time buyers to purchase through schemes such as shared ownership.

First-time buyers are also exempt from paying stamp duty on the first £300,000 of a property purchase on a home costing up to £500,000.

Other schemes include First Homes, under which first-time buyers, key workers and local people, can purchase a home at a 30% discount to its market price.

While the 95% mortgage guarantee scheme helps buyers get a mortgage with just a 5% deposit.

First-time buyers can also save for a deposit using the Lifetime ISA, which the government tops up with a 25% bonus of up to £1,000 annually.