House prices have also overtaken the cost of the deposit as the top barrier to homeownership, leaving just over a quarter of renters not interested in homeownership at all.
Rent and mortgage spending increased 5.2% year-on-year in July, the highest increase since February. Rising costs impacted confidence in the UK housing market, which dropped to 26% in July, compared to 27% in June.
Renters spend 30.6% of their take-home pay on rent, whereas homeowners spend 26.6% on mortgage costs. Just over half of consumers believe renting a property is more expensive than paying a mortgage.
Rising costs diminish property buying aspirations for renters
Nearly two-thirds of renters have seen or expect to see their rent increase this year, reducing their ability to save for a deposit. Costs are also impacting the desire to own a home, with nearly three in 10 renters reporting to be uninterested in homeownership, the highest figure this year.
Only 12% believe that homeownership is possible within the next year and 16% believe it will be possible within five years. Affordability pressure is also limiting choice, as nearly four in 10 report they are unable to afford to buy a home in the area in which they currently or would like to live.
Mortgage payers have a cost advantage
The reduction in interest rates this year has meant that more than half of consumers believe renting a property is more expensive than paying a mortgage. This figure rises to 61% of homeowners and falls for renters at 42%.
Whilst housing accounts for almost a third of renters’ take-home pay, homeowners report spending just over a quarter of their earnings on their mortgage. Income levels also differ among those surveyed – homeowners are more affluent, with an average reported gross income of £37,775 versus £23,562 for renters.
Around a quarter of renters say they are currently struggling to afford their monthly payments, compared to the one in six homeowners who feel the same way about their mortgage. Almost half of renters report adjusting their spending habits to ensure they can continue to afford housing costs.
Renters save now to minimise future borrowing
Almost half of those looking to buy their first home would rather save as much as possible for their deposit to reduce future mortgage repayments. Around a third would be willing to move to a smaller property to borrow less. Only 12% would consider getting onto the property ladder with a smaller deposit and face higher borrowing costs.
Jatin Patel, head of mortgages, savings and insurance at Barclays, said: “Many people dream to one day own a home, but our latest findings highlight how renters are finding it ever harder to save for a deposit while keeping up with rising costs.
“More positively though, we’re still seeing savers create strong habits, and consider carefully the balance between getting into the market quickly with a lower deposit or trying to minimise monthly repayments in the longer term.
“We’re committed to giving first-time buyers the tools they need to get on the property ladder. That’s why we’ve adapted our product range to include new propositions like Mortgage Boost, so that family members can still support first-time buyers, even if they don’t have a lump sum that they can gift upfront or use with our Family Springboard mortgage.”
Will Hobbs, managing director of Barclays Private Bank and Wealth Management, said: “The UK economy remains in a better place than the public debate would suggest. While there is, as usual, much to worry about, the fact that real (inflation adjusted) household incomes continue to grow briskly remains an important positive, as is the still substantial arsenal of ‘excess’ savings.
“The key to unlocking this pent-up spending power is confidence, a difficult factor to measure and to forecast. There is always much that can go wrong in the path ahead, but it was ever thus. Hindsight happily tells us that even the blind optimist has triumphed over the sober pessimist for most of the last several centuries. For the UK’s economic outlook at the moment, the causes for optimism are more substantial than widely acknowledged.”
