One in five households had to use savings to pay rent or mortgage earlier this year, ‘concerning’ government figures show

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  • Fifth of households used savings for housing costs between April and May
  • Tenants more likely than landlords to switch to rainy day funds
  • Experts claim, in view of rising inflation, the use of savings in this way is worrying

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Earlier this year more than one in five households had to invest in their savings to pay their rent or mortgage, official data showed.

According to the latest English housing survey covering April and May, renters were slightly more likely than mortgage-holders to use their savings for this purpose.

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Personal finance experts said the figures were ‘concerning’, especially given that inflation is now pushing up the cost of living even more.

If these trends continue, he said it could lead to a sharp increase in defaults.

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Using savings: More than one in five households had to delve into their savings between April and May this year to pay their rent or make a mortgage repayment

Robert Payne, director of Langley House Mortgage, said: ‘These are concerning figures that show a volatile pattern of financial behavior among some.

“If this trend continues, we are headed for a large number of defaults, which is bad news for all.

‘It is not clear why this is happening, but if it is linked to the impact of Covid-19, we are potentially only seeing the tip of the iceberg, extremely worrying times ahead of us.’

Overall, about 22 percent of households had to use their savings to pay off their mortgage or rent during this period, with 29 percent being private renters, 28 percent ‘social renters’ and 19 percent being mortgaged. .

Daniel Wiltshire, actuary and independent financial advisor at Wiltshire Wealth, said: ‘These findings are substantial, but inflation is projected to rise above 4 per cent by year-end and the cost of borrowing is also expected to rise, squeezing household finances even further. are ready for.

‘There are sad hard times ahead.’

hard time?  Percentage of people owed with their mortgage over time

hard time? Percentage of people owed with their mortgage over time

Cost: Percentage of income spent on housing costs over time

Cost: Percentage of income spent on housing costs over time

In 2019, nearly 59 percent of private renters surveyed said they expected to buy their own home at some point in the future.

By the summer of last year, that figure had dropped, with only 49 percent saying they expected to own a home.

Leveling up, the survey published by the Department of Housing, ‘In April-May 2021, buying expectations among renters with 45 per cent private renters and 20 per cent social renters said they expect to buy their own home. and communities said.

On the mortgage front, between April and May this year, 2 percent of homeowners were in arrears with their mortgage, which is higher than the pre-pandemic rate of 0.5 percent, the report said.

Ten percent of mortgagees said they were finding it ‘rather or too difficult’ to keep up with their mortgage payments in the past year. This figure has remained unchanged for the past few months, but is higher than the level of 4 per cent seen before the pandemic.

The proportion of income people typically use to pay for their mortgage payments is about 18 percent.

This has remained constant during the pandemic and is the same proportion that mortgagee spent on average in 2019, said today’s report.

According to the findings, around one million or 4 percent of the households said they had moved to another home since the end of last year.

Of the homes they had moved in, 16 per cent cited Covid-19 as the main reason for the move and 21 per cent said the pandemic had some effect on their decision to install sticks in at least one new property.

Over the past year, the housing market has strengthened on the back of cheaper mortgage deals, buyer demand for more space and the chancellor’s stamp duty holiday.

Mortgages will become more expensive when interest rates rise, and anyone with a variable mortgage rate deal will see their rate increase in line with any changes from the Bank of England.

Homeowners with a fixed mortgage deal will be affected by any increase in interest rates only when their current deal expires.

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