Families in the UK are among the worst off in Europe when it comes to the cost of running a home, a charity warned last Thursday.
Four in 10 people living in rental accommodation cannot afford to save anything for a deposit to buy their own home
Around one in six people in the UK (16.5 per cent) is spending more than 40 per cent of their income on housing costs such as rent, mortgage payments and other household bills, which charity Shelter said was evidence of the “deeply dysfunctional” housing market.
It highlighted EU research, which found that the UK has three times the share of people weighed down by high housing costs than its neighbour France, where 5.2 per cent of people were spending more than 40 per cent of their income on such costs.
Only Denmark and Greece were found to have a bigger share of people paying high housing costs than the UK out of 29 countries analysed.
Countries such as Spain, Italy and Portugal fared better than the UK in the study. In Portugal, 4.2 per cent of people were found to be spending more than 40 per cent of their income on housing. Meanwhile, 11.2 per cent of people in Spain and 7.5 per cent of Italians faced the same strain.
Shelter said that a lack of affordable homes caused by a succession of governments and years of easy access to mortgages had helped to drive up house prices.
Campbell Robb, chief executive of Shelter, said: “These figures are the evidence that the UK housing market is deeply dysfunctional.
“With so many families spending huge amounts of their income on their rent or mortgage, people will be making daily trade-offs between food bills, filling the car tank with petrol, and paying their housing costs.”
Households have come under intense pressure from high living costs at a time when they are seeing little return on their savings, although there are signs of the situation improving as inflation eases off.
However, a study published by SpareRoom.co.uk earlier last week found that four in 10 people living in rental accommodation cannot afford to save anything for a deposit to buy their own home, as high living costs and loan repayments are already swallowing up their cash. Just over one in seven people included in that survey said they are having to spend more than two thirds of their take-home pay just on their rent.
Rents have soared over the last year as people unable to get on the property ladder, because they cannot raise a deposit or meet tightening borrowing criteria, have stayed in the rental sector.
A recent study from LSL Property Services, which owns chains Your Move and Reeds Rains, found that strong competition among tenants has helped the average rent to rise to £712 (€910) a month on average.
Average mortgage payments for new borrowers stood at 27 per cent of disposable earnings in the fourth quarter of 2011, the lowest share since spring 1997 when a 26 per cent proportion was recorded, and well below the 37 per cent average over the past 27 years.
But mortgage lenders have been steadily increasing their rates for both new and existing borrowers in recent months, blaming the weak economy and the increased cost of funding a mortgage.
Borrowing is expected to become more expensive and tougher in the coming months, particularly for those with a small deposit.
Housing Minister Grant Shapps said: “This government is pull-ing out all the stops to build the affordable homes this country needs – which is why govern-ment and private sector are jointly investing over £19 billion (€24) in an affordable housing programme set to exceed expectations and deliver 170,000 homes by 2015.
“We’ve also introduced schemes to help people on to the housing ladder – including the Newbuy scheme, which enables people to buy newly-built homes with a fraction of the deposit they would normally require, and the Firstbuy Scheme which offers a valuable alternative to the bank of mum and dad for first-time buyers struggling to get together a deposit.
“But one of the most important things we’ve done is tackle the record deficit we inherited, which has prevented the need for rapid increases in interest rates which would have placed additional pressure on hard-pressed families.”