Household financial resilience deteriorates sharply when housing costs exceed 40% of income, according to new research examining the finances of 10,000 UK adults.
The Building Financial Foundations Barometer from Yorkshire Building Society and the University of Bradford identifies housing costs as one of four key factors associated with households becoming more financially vulnerable.
Its modelling finds resilience falls significantly once more than 40% of household income is absorbed by housing costs.
The findings come as separate figures highlighted by Propertymark show 31% of adults reported finding it very or somewhat difficult to afford their rent or mortgage payments during July.
FINANCIAL PRESSURE
The Yorkshire Building Society research gives the average UK household a Financial Wellbeing Score of 680 out of 1,000, placing it in an ‘amber’ category – broadly financially stable but vulnerable to disruption.
Around a third of households fall into each of its red, amber and green categories.
Housing costs are not the only tipping point identified. Financial wellbeing also falls when unsecured debt exceeds £5,000, while having savings equivalent to three months of essential expenditure and maintaining even a modest monthly surplus are associated with greater resilience.
HOUSING COSTS
Tina Hughes, Director of Savings at Yorkshire Building Society, says: “This research shows that financial wellbeing cannot be understood through income alone.
“People across different income groups can be vulnerable to a sudden change in circumstances, particularly if they have little room in their household budget or no financial buffer to fall back on.”
Dr Kamran Mahroof of the University of Bradford adds: “The data shows us clear thresholds – each extra month of savings runway delivers a step-change in resilience.
“The data shows that financial resilience isn’t just about income; it’s about having buffers to absorb life’s shocks.”
