First-time buyers planning to climb on to the housing ladder in 2016 will have already spent an average £52,900 on rent, a new report reveals today.
That means the average buyer this year will have spent 16.4 per cent of their total lifetime earnings on rent in the years they were a tenant.
In 2015, UK tenants spent an average 22 per cent of their wages on the rent.
The data – from the Association of Residential Letting Agents (Arla) and the Centre for Economics and Business Research (CEBR) – shows that London buyers have spent the most: £68,300. Meanwhile, in the North-east of England, a first-time buyer is likely to have spent £31,300 on rent, the lowest amount in the country.
The figures were calculated on the basis that the typical first-time buyer is aged 31, and would have spent 13 years renting since leaving the family home.
The report has also calculated that those entering the rental market this year will have to fork out £64,400 on average before they can afford to buy a home. The figure in London is more than 40 per cent higher at £91,500.
David Cox, Arla’s managing director, said: “The rising cost of rent in this country is a huge issue, and is preventing tenants from being able to save to buy a home.”
He added that “rents are becoming alarmingly unaffordable due to the lack of affordable housing”.
A fifth of UK tenants do not expect they will ever be able to afford to be a homeowner. The average house price stood at £196,829 at last month, according to Nationwide building society.
Mr Cox warned that as interest rates start rising, so there will be more pressure on rental costs and they are likely to increase as a consequence.
Betsy Dillner, director of the campaign group Generation Rent, told The Independent that more legislation for the rental market would be welcomed by tenants.
Ms Dillner said: “If we had rent controls and better protection from eviction, renters could enjoy stability now – and fewer people would be so desperate to buy.”
But there was better news for existing homeowners as the Council of Mortgage Lenders (CML) reported that fewer than one in 1,000 mortgage deals ended in repossession last year, with the number of homeowners behind on payments falling to its lowest level for more than a decade. CML data showed the annual arrears rate for 2015 was 0.92 per cent, equating to less than one in 100 home loans.
Its quarterly statistics also showed that mortgage arrears among owner-occupiers were running at 1.03 per cent of all loans at the end of 2015, with a lower rate of 0.31 per cent among landlords, continuing a recent trend of fewer arrears in the buy-to-let market. There was around one repossession per 2,500 mortgages in the sector in the fourth quarter, compared with one in 5,000 in the home-owner market.
Biggest business scandals in pictures
Biggest business scandals in pictures
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Rishi Passi, chief executive of the development lender Oblix Capital, said the repossession rates are low “thanks to a lending landscape that has continued to tighten its belt significantly since the mistakes of the financial crisis”.
He added: “An ongoing spell of low interest rates - not expected to rise until the third quarter of 2017 – has given property owners some room for manoeuvre before repayments and mortgage rates start to increase again.”
But the CML warned borrowers to plan ahead for a time when the interest-rate environment may change.Reuse content