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Half of Private Renters Fail UK Government’s ‘Financial Resilience’ Test

Recent data reveals a concerning trend: nearly half of individuals who rent privately in the UK fail to meet the government’s ‘financial resilience’ criteria. This test, conducted by the Office for National Statistics (ONS), measures financial resilience by assessing whether households can withstand a 25% drop in income.

The statistics are even more alarming for specific demographics, with 55% of single parents and 34% of households where the main earner suffers from a long-term illness or disability also falling short of the required financial resilience.

Rohit Kohli, director at The Mortgage Shop, comments on the ONS report, stating, “The ONS report paints a sobering picture of the UK’s current economic landscape. Vulnerable groups – notably disabled adults, renters, and single parents – are disproportionately struggling.” He highlights the stark reality of rising costs for essentials, which have seen over a 25% increase in two years, placing a significant burden on household finances.

Sarah Coles, head of personal finance at Hargreaves Lansdown, further elaborates on the ONS’s measures of resilience. She notes that 53% of renters can’t afford unexpected bills, and 13% have faced food shortages without the means to replenish supplies. Additionally, 55% of renters struggle to pay their rent, a stark contrast to the 34% of mortgage holders facing similar challenges. Coles points out that the situation for renters has worsened, with the percentage of those struggling rising from 42% in the spring to 55% currently.

Coles also raises concerns about the potential long-term impact of the cost-of-living crisis on those with mortgages. Based on her calculations, by summer, approximately 230,000 people at risk of falling into arrears will have cash savings covering less than three months of essential spending, categorizing them as ‘high risk’. An additional 470,000 are facing unsustainable spending, putting them at ‘critical risk’.

“These figures indicate that the cost-of-living crisis for those with a mortgage is likely to last even longer,” Coles cautions, shedding light on the growing financial challenges faced by a significant portion of the UK population, particularly among renters, single parents, and those with long-term illnesses or disabilities.