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Rising cost of rental deposits

Posted 10 March 2016

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With the price of rental deposits set to rise significantly in the next ten years, people may find that they’re being priced out the rental ladder.

It’s not uncommon to hear of people being priced out of the property ladder, but will we soon see people also being priced out of the rental ladder too? According to Money.co.uk, the average price of rental deposits is set to increase significantly. This means that people looking to move out of their parents’ home, or simply move to another rental property, could face similar financial challenges to those looking to own their own home.

Deposits set to rise significantly

According to the research, the average deposit for a rental property is estimated to reach £1,111 in ten years’ time. This accounts for 70% of the average Brit’s monthly income at £1,576. Property prices in London have long since made the news, and this rise will be felt even more keenly in the capital, with deposits set to rise to £2,733, which is actually more than the average Londoners’ monthly wage, which stands at £2,281.

The trends in this area also tell us that by 2026, landlords will want renters to provide them with six weeks rent up front for the deposit, rather than four weeks, which is customary at the moment.

Monthly rent prices are also set to rise – by 28% over the same time period – but nowhere near as much as the predicted 40% rise in rental deposits.

Rise in renting

It seems that people are becoming more and more inclined to rent, (possibly because of the huge financial challenge of saving for a deposit on a house), so this increase will affect a significant portion of the population. A whopping 7.2million households in England and Wales are estimated to be rental properties in ten years’ time, or to put it another way, by 2026 private renters will represent a third of all households.

People borrowing to afford the essential things in life

Clearly if this situation progresses as expected, people wanting to rent could face a harder financial road, being either forced to live with their parents for longer, or having to borrow in order to afford the deposit. This would in turn push up the cost of renting and could lead to a similar situation to the one we saw in the run up to housing crisis.

The idea of people needing to borrow to get by day-to-day is something backed-up by our own research. We found that women in particular are having to borrow not just for the big, luxury purchases, but everyday costs including housing costs, food and clothes.

If you find that you’re having to borrow to afford the essential costs in life, it might be time to reach out for help. We have dedicated debt experts ready and waiting to take your call and give you the guidance you need. They can help with budgeting advice to manage your everyday finances and, if things have got to the point where you need to look into a debt solution, they can recommend the very best one for your situation.

 


by Christine Walsh

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To find out more about managing your money and getting free debt advice, visit Money Advice Service, an independent service set up to help people manage their money.