"The key to unlocking this pent-up spending power is confidence. A nebulous factor, both hard to measure and even harder to forecast"
- Will Hobbs - Barclays
According to the latest Barclays Property Insights data, just 17% of renters were saving for a deposit in July, down from 31% at the start of the year.
Spending on rent and mortgages increased by 5.2% year-on-year in July, marking the sharpest rise since February. Utility costs also climbed, rising 2.7%. These increases have had a more significant impact on renters than homeowners, contributing to reduced confidence in both the housing market and the possibility of homeownership.
“Many people dream to one day own a home,” said Jatin Patel, head of mortgages, savings and insurance at Barclays. “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.”
House prices have now overtaken deposit size as the main obstacle to ownership. In July, 38% cited property prices as the top barrier, compared with 35% who pointed to deposit requirements.
Affordability pressures are widespread. Nearly two-thirds of renters (62%) have experienced or anticipate rent increases this year, limiting their ability to save. Just 12% believe they can buy a home within the next year. This figure increases slightly to 16% who see ownership as achievable within five years, though it has fallen from 19% in June.
For some, the financial challenges have altered both goals and expectations. Almost four in ten renters (37%) say they cannot afford to buy in their current area or where they would like to live. Meanwhile, 28% are no longer interested in owning a home, the highest share recorded this year.
Barclays found that just 17% of renters are currently putting money aside for a deposit. Common saving strategies include cutting discretionary spending (14%), reducing holidays (11%) and taking on additional work or side hustles (8%).
Homeowners, by contrast, appear less financially strained. Housing costs account for 30.8% of renters’ take-home pay, compared to 26.6% for mortgage holders. Although homeowners face other costs such as maintenance and bills, differences in income are also significant. The average reported gross income for homeowners is £37,775, while renters report £23,562.
A quarter of renters (26%) say they are struggling to meet their monthly payments, compared to 15% of homeowners. Nearly half (45%) of renters have made changes to their spending in order to continue affording housing costs.
Among those looking to buy, many are aiming to save more to lower future borrowing. Almost half (45%) would prefer to maximise their deposit and reduce mortgage payments later. Just 12% would consider entering the market with a smaller deposit and accepting higher monthly costs. Additionally, a third (34%) say they would opt for a smaller property to keep borrowing down.
Some are prepared to use all available funds to get on the ladder. One in seven (16%) say they would put their full savings toward a deposit, rising to 20% among millennials.
Barclays’ data also highlights a perceived cost advantage for mortgage holders. More than half of UK adults (55%) believe renting is more expensive than owning, a figure that rises to 61% among homeowners. Among renters, 42% share this view.
“The UK economy remains in a better place than the public debate would suggest,” commented Will Hobbs, managing director, Barclays Private Bank and Wealth Management. “Many of these talking heads seem narrowly fixated only on what could go wrong for society, the economy and the future of both, using frequently questionable evidence in support. 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,” Hobbs added. “A nebulous factor, both hard to measure and even harder to forecast. Those trying for a balanced view of the future will remember that in terms of forecasting success, the blind optimists would have trounced the sober pessimists for most of the last few hundred years on the economy both in the UK and globally.”
