The number of renters actively saving for a deposit has dropped to its lowest level this year as rising rents and living costs continue to erode disposable income and weigh on homeownership aspirations, new data from Barclays Property Insights reveals.
Just 17% of renters were saving for a deposit in July, down from 31% in January.
The sharp fall coincides with a 5.2% year-on-year increase in spending on rent and mortgage payments, alongside a 2.7% rise in utility costs.
The data suggests that renters are facing a disproportionate financial burden compared to homeowners.
INCOME GAP
While property costs account for over 30% of renters’ take-home pay, mortgage holders typically spend just over 26% of their income on housing. Differences in income levels partly explain the gap, with homeowners reporting an average annual gross income of £37,775 compared to £23,562 among renters.
This disparity is fuelling pessimism among would-be buyers. Only 12% of renters believe they will be able to buy a home within the next year, with a further 16% saying it might be possible within five years, down from 19% in June.
Confidence in the housing market has weakened further as house prices overtake deposit size as the biggest perceived barrier to entry.
NOT INTERESTED IN BUYING
Rising costs are not only limiting renters’ ability to save, but also influencing long-term attitudes toward homeownership. More than a quarter (28%) of renters now say they are uninterested in buying a home, the highest proportion so far this year.
Nearly four in 10 believe they will be unable to afford to buy in the area where they currently live or would like to in future.
Rent increases – real or expected – are widespread. Nearly two-thirds (62%) of renters say they have already experienced or anticipate a rent rise in 2025.
As a result, many are turning to cost-cutting or secondary income streams to build deposits, with 14% cutting discretionary spending, 11% reducing holiday plans, and 8% pursuing side hustles.
AFFORDABILITY CONCERNS
Affordability concerns are also shaping buyers’ preferences. Almost half (45%) of those planning to buy a home say they are aiming to save as much as possible to reduce future mortgage repayments, while just 12% would consider entering the market with a smaller deposit despite the higher borrowing costs.
A third (34%) say they would downsize their property ambitions to borrow less, and 16% would be willing to use all their available savings to get on the ladder – rising to 20% among millennials.
While the cost of borrowing has eased slightly following interest rate cuts earlier this year, the perceived cost advantage of homeownership is growing.
Over half (55%) of consumers believe renting is now more expensive than paying a mortgage – a view shared by 61% of homeowners and 42% of renters.
However, despite this perception, the financial strain remains acute. More than a quarter of renters say they are struggling to meet their monthly housing payments, compared to one in six homeowners. Almost half have already made lifestyle adjustments to maintain affordability, underlining the pressure facing a generation of renters now increasingly priced out of homeownership.
DEPOSIT WOES
Jatin Patel, Head of Mortgages, Savings and Insurance at Barclays, says: “Many people dream to one day own a home, 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.”
IMPORTANT POSITIVES
Will Hobbs, Managing Director, Barclays Private Bank and Wealth Management, adds: “The UK economy remains in a better place than the public debate would suggest.
“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, a difficult factor to measure and to forecast. There is always much that can go wrong in the path ahead, but it was ever thus.
“Hindsight happily tells us that even the blind optimist has triumphed over the sober pessimist for most of the last several centuries. For the UK’s economic outlook at the moment, the causes for optimism are more substantial than widely acknowledged.”
