The current UK rental market is a disaster of epic proportions. The cost of living has spiked, the rental market is a jungle, and salaries have remained the same despite inflation and rising prices. Adding a cherry on top, wage
growth is at its lowest in almost two years.
Due to these dire circumstances, the UK public is clearly struggling. The
average UK tenant spends 39.1% of their monthly income on rent, which is 11% greater than any other country in Europe. This is not the norm, nor should it be.
Speaking to Gregor Mowat, co-CEO and co-founder of credit business Loqbox, he explained why young adults are being called “Generation Rent” and what hurdles the mortgage market has lined up for them.
“Young people, especially the millennial generation, are being priced out of the housing market and therefore renting their homes for longer periods of their lives than previous generations. The term ‘Generation Rent’ refers to the challenging trap that
millennials are caught in – stuck between the forces of inflation, higher interest rates pushing up mortgage costs, and more renters than available housing units. Even when they do secure a rental property, renters then face more of their disposable income
going towards climbing energy bills and other fallouts from the ongoing cost-of-living crisis. That said, while the outlook for younger generations may seem bleak, there are practical steps that people can take to maximise their rental budgets and defeat the
dreaded ‘Generation Rent’ moniker.”
Nearly half of adults struggle with mortgage and rental costs reports the
Office of National Statistics, which is generating concern about day-to-day payments and credit commitments as the cost of living crisis rages on, like a giant nightmarish monster of children’s imaginations crushing our livelihoods underfoot.
44% of adults surveyed reported that their rent or mortgage has gone up in the last six months, with 35% reporting they are finding difficulty making these payments. Of younger adults, aged 16-29, who have had their mortgage and rent increase, 44% are facing
difficulty. 22% of those surveyed reported that they had to borrow money or use more credit in the last month, compared with last year.
Mortgage lending data from the
Financial Conduct Authority revealed that outstanding mortgage balances increased by 4.2% in Q1 2024 to £21.3 billion, and is 44.5% higher than last year. The value of gross mortgage advances has also increased 16.7% from the previous quarter, and is 15.5%
higher than the previous year.
Mowat states that the past two years has seen the rental market hike up by over 10%, with renters paying £1,300 on average for rent each month, more than half of their monthly income. He adds that the age of first-time homebuyers is rising, with less and
less young people able to afford a home.
Many of the so-called “Generation Rent” stress about their long-term financial goals, particularly their capability to ever afford buying a house in the current economy.
On the subject, Mowat states: “The prospect of saving for a house deposit can be daunting, particularly when you head to the local supermarket and see just how much the price of butter has risen. But my advice would be to develop a savings plan that you
can stick to. Start by researching how much you need to save to achieve your goal and budget accordingly. Remember that even small, consistent contributions can accumulate over time, bringing you closer to your goal – and don’t punish yourself for any slip
ups along the way.”
Do renters have rights?
Not many. The
Renter’s Rights Bill was re-proposed earlier this year to protect the UK’s 4.6 billion renters amidst the current financial crisis.
The Bill’s measures includes abolishing legislation that allows tenants to challenge to unfair rent increases without fearing eviction, protect tenants against backdoor evictions, put a stop to landlords discriminating against tenants who receive benefits
or have children, ending rental bidding practices, strengthen rent repayment orders, apply the Decent Homes Standard to the private sector, and more.
“Passing the Renters’ Rights Bill is a first step. But beyond that, the government should look to prioritise better financial education. Many people lack the knowledge and tools to make their money stretch further or manage the stress caused by high rent
and bills,” Mowat states. “In the long term, it will take a collective effort from people, businesses, and the government to create stronger protections for renters and improve financial literacy. By empowering people with a better understanding of personal
finance, we can help them take control of their budgets and improve their financial wellbeing.”
What solutions are available to “Generation Rent”?
What can be the solution to these livelihood-threatening challenges? There are ways for people to adapt their financial plans and use tools available to save funds and protect themselves as much as possible as the financial crisis continues.
Mowat advises that renters have an emergency fund on standby and build up their credit history to stay afloat amid stagnant wages and inflation. He says renters often face paying a higher amount in rent than in a mortgage if they do not qualify for one,
having a visible credit history makes a significant difference on that front. By using credit agencies, renters can build up their credit to secure mortgages.
According to
Tink, Brits could get back £24.5 billion per year by using digital financial management tools. Their report found that 7.6 million users in the UK use digital financial management tools. Of those surveyed, 75% of consumers reported that they are thinking
more seriously about their spending habits due to the cost-of-living crisis. 49% expressed that they want to build up their savings, 26% wanted to have an emergency fund, and 27% wanted to cut off unnecessary expenses.
Customers are willing to switch banking providers if they offer digital banking tools that support them in moving towards their financial goals, 36% stated they would make a switch for the benefit of their fiscal needs, 32% responded that they would switch
if their new bank offered them with spending tracking and management tools.
Nearly half (46%) of banks surveyed that offer digital financial services see increased card usage from users and increased amounts of payments.
Touching on the future of the UK renting market, Mowat states that digital financial tools can make an impact. “I am cautiously optimistic. Recent data from
Zoopla shows that the rental market is cooling, with rent increases slowing to the lowest rate in three years. Government initiatives like Lifetime ISAs and shared ownership schemes are also providing much-needed support for first-time buyers.
“Fintech companies like Loqbox are also playing a key role in helping renters strengthen their financial resilience. Our mission is to give everyone access to a richer life by ensuring no one is left out of the financial system. Through better financial
education, we can empower renters to take control of their money, reduce stress, and work towards homeownership.”
He adds that financial education is a vital step that is often “overlooked”, and that there is still a long road ahead to push financial education forward so that more people can build up habits that ensure financial stability.