Renters are more likely to struggle to meet housing costs than mortgagors as the cost of living rises, research shows.

Data from the Office for National Statistics (ONS) in its “The rising cost of living and its impact on individuals in Britain” The report highlighted that a higher percentage of renters than mortgagors were struggling to pay household bills compared to a year ago, with 37% of renters saying so compared to 23% of mortgagors.

He said real estate tenants are more concentrated in lower income quintiles than mortgagors and therefore “have the potential to be more affected by changes in their cost of living”.

Renters “may be more exposed to rent increases,” with 34% saying their rent has increased in the past six months. The ONS also revealed that March 2022 saw the biggest annual increase in private rental prices paid by tenants in the UK since July 2016, at 2.4%.

For those paying off a standard variable rate (SVR) mortgage, housing payments likely rose, with the average floating mortgage interest rate rising 0.2 percentage points. Some 34% of mortgage holders reported an increase in their payments.

The ONS found that of those paying off a mortgage or rent, 30% said it was very or somewhat difficult to pay.

Differences between those struggling to make payments are most evident when broken down by rental type, with 39% of tenants more likely to say it is somewhat or very difficult to pay housing costs, against 21% of mortgagors.

Despite this, only 3% reported being in arrears with rent or mortgage payments, and less than 1% of mortgagors reported mortgage arrears.

Of those currently paying rent, 6% said they were in arrears. People living in disadvantaged neighborhoods made up the majority of this segment.

The rising cost of living

Besides housing, gas and electricity bills were the second most common reason given by adults for the rising cost of living. It was at an all time high with 83% saying they had been hit by higher costs.

Worryingly, this data was collected before the April 1 energy price cap hike, where bills rose by an average of 54%, with four in 10 people saying they had trouble with their bills in March. This figure rises to 57% for people living in the most disadvantaged neighbourhoods.

For 6%, they are already behind on their energy bill, which reaches 13% in the most disadvantaged areas. Additionally, 13% of renters also reported falling behind on their energy bills, compared to just 3% of those who had a mortgage and 2% who owned their homes entirely.

Nine out of 10 people reported an increase in their cost of living in March, a 25% increase from the number recorded in November 2021.

So 23% said it was difficult or very difficult to pay their usual household bills, according to ONS data.

This represents an increase from the 17% recorded between November 3 and November 14, 2021.

Snapshot data compiled between March 16 and 27 revealed that costs have soared in food, energy and housing, but rising bills will be hit hardest by those living in the most deprived areas from England.

Indeed, housing, fuel and electricity are the least income-elastic expenditure categories.

Here, the proportion of people struggling or struggling to pay their usual bills rose from 25% to 34%, half the number of people living in the least deprived areas of England, where those in difficulty made up 17 % .

Borrowing, credit and savings

Meanwhile, 17% of adults said they were borrowing more money or using more credit than a year ago, but the ONS said the figure was ‘stable’ given the rising cost of life.

One potential explanation is the use of savings accumulated during the pandemic. A quarter of households said they were using savings that had accumulated during the Covid shutdowns, which meant all but essential retailers were closed to stop the spread of the virus.

A third of people said they reduced their food purchases or shopped more.

But for those in the most deprived areas, 23% said they were twice as likely to borrow money or use credit as usual compared to those in the least deprived areas of England , where it was 11%.

Adults living in the most deprived areas of England were more likely to report not being able to save in the next 12 months than adults living in the least deprived areas of England. In March 2022, 55% of people living in the most deprived areas said they would not be able to save in the next 12 months; an increase from 39% in November 2021.

In contrast, 34% of adults living in less deprived areas of England said that given the general economic situation they would not be able to save money in the next 12 months.

Shekina is the business writer for Mortgage Solutions. She has over four years of experience in the B2B publishing market, with previous industries including accounting, pets, funerals, hospitality, retail and jewelry. She currently reports mortgage market news and liaises with financial clients to produce sponsored content. Follow her on Twitter at @ShekinaMS