Nearly 40% of tenants who are trying to escape being part of today’s ‘Generation Rent’ could become home-buyers when the 95% Help to Buy scheme is implemented in January.
The statistic emerges in research from Rightmove which found that very few ‘trapped renters’ – defined as tenants who would like to buy but can’t afford to – are currently saving for a deposit.
Two in five (39%) of those feel they will never get there unless they have a stroke of luck – which Rightmove says could come in the form of the Help to Buy scheme, which will enable people with only a 5% deposit to get on the housing ladder.
The research, among 3,214 current tenants, shows that while 42% of ‘trapped renters’ are currently actively saving for a deposit, only one in 12 are on course to meet their deposit goal – and the majority have not begun to save.
The reason is simple: rent accounts for 37% of take-home pay on average, and for at least 50% of take-home pay for 27% of tenants.
According to the Rightmove survey, nearly six in ten (58%) current tenants feel ‘trapped’ into rental lifestyles. Of those who are currently saving towards deposits, the average savings represent just 11% of take-home pay.
When asked to evaluate how their saving efforts were going, only one in 12 (8%) current savers stated they were ‘on course’ to meet their target deposit, while 40% said they could only afford to save a little each month but would ‘get there eventually’.
A further 39% said that as they weren’t able to put enough away, they would ‘need a windfall’ in order to reach their goal.
Rightmove said that its findings “underscore the need for assistance to overcome lenders’ deposit hurdles, something that the Government’s new Help to Buy scheme appears to offer”.
Rightmove director Miles Shipside said: “Demanding deposit hurdles have made the transition from tenant to first-time buyer challenging for many in recent years.
“Those who expect to make that move this year tell us that they’ve been working towards a deposit goal of £20,000, rising to £30,000 for those in London – figures that must seem daunting to even the most frugal tenant.
“Even for those who’ve been diligently saving, many are still left hoping that their lottery numbers come up or the Bank of Mum and Dad proves less picky with its lending than the High Street banks.
“However, the Government’s proposed new Help to Buy scheme could yet prove to be a ‘virtual windfall’ by lowering the deposit hurdle to 5%, providing much-needed assistance and motivation for Generation Rent.”
According to the Rightmove survey, one-third of all trapped renters said that getting on the home ownership ladder is a priority.
The survey was completed last month, between April 9 and April 25.
Help to Buy will introduce 95% mortgages on all housing stock – old and new – with the loans underwritten by a mortgage guarantee. The scheme is due to start next January 1.
Article courtesy of Landlord Today