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Latest News Why ‘Generation Rent’ isn’t going anywhere

Why ‘Generation Rent’ isn’t going anywhere

Property prices

Most British people still dream of owning their own home but for many, especially those in the younger generation, this is looking like an increasingly impossible goal.

19% of UK homes are privately rented, with that figure set to grow to 25% over the next 10 years. One survey predicts that by that time over 50% of those aged 20-39 will be renting. The reason is that although mortgage rates are historically low and the government is providing various schemes to help first-time buyers, there just aren’t enough affordable homes on the market to meet demand and as a result house prices are prohibitively high.

Vicious circle

Because there aren’t enough houses available, they cost more to buy (supply and demand). This means that saving up for a deposit now takes an average of eight years, requiring 80% of income. Compare this to 20 years ago, when it took just one year to save the 20% of income normally required. It’s said that if the price of food had risen in line with the price of houses, we’d now be paying more than £10 for a pint of milk!

Because more people can’t afford to buy, more are renting. This means that landlords can charge higher rents, which makes buy-to-let property an attractive proposition. This, in turn, means that there are fewer houses on the market for prospective owner-occupiers, thus pushing up buying costs and rents, creating a vicious circle as far as tenants looking to get their foot on the property ladder are concerned.

Tenant concerns

Another irony is that renting actually offers worse value than paying a mortgage, typically taking 50% of income compared to around 20% once the deposit has been paid. Tenants also face the uncertainties that come with not owning their own home, such as not knowing whether their landlord may suddenly decide to sell the property and give them notice. Home contents insurance is essential for anyone in rented accommodation, in part due to this instability of their living situation.

Of course, some do manage to save up for a mortgage, although the average age of first-time buyers is now in their late thirties. Many of these have to rely on ‘the bank of mum and dad’ for financial help in getting a deposit together, which can often see the older generation working past retirement age in order to help their children get a home of their own. Although the government has pledged to introduce thousands of new ‘starter homes’ by 2020, many worry that Generation Rent is here to stay.

The new Help-to-Buy ISA

In a bid to help first-time buyers, the government has recently launched a new Help-to-Buy Scheme. The new Help-to-Buy ISA pays first-time buyers a government bonus. For example, save £200-a-month and they’ll add £50, up to a maximum of £3,000, boosting your ISA savings of £12,000 to £15,000. More information can be found on the government website.

Related products: Personal Insurance Tenants Contents Insurance