Rent and Rental Impact on Household Budgets
When it comes to paying for a home, most people go for either rent or mortgage. When compared to mortgage, rent is a lower expense. However, the disadvantage of a rent is you will never own the house no matter how many years you pay rent.
Do people prefer to rent or buy?
In the UK, most people still prefer to buy their homes as opposed to renting. As per a 2011 government survey, 36% of residents were living on rent as opposed to 64% owning their homes. But the percentage of renters has increased from 2001 where only 31% were living on rent. In fact in London, more than 50% were living on rent. A few reasons why people go for renting is the surge in house prices, the lower increase in wages as opposed to prices and stricter lending rules. Yet, by and large, the percentage of buyers is more than renters.
How does rent affect your household expenses?
According to a January 2014 survey, the average rent in the UK is £665 each month, and the average for London is £1,516. As it is evident rent forms a large portion of the household budget. In fact, as per a 2013 survey, nearly 31% of UK residents are paying unaffordable rents, as high as 1/3rd of their disposable income.
How much are rents increasing?
As per official data, rent expenses increased 1% in 2013 as compared to 2014. As per a survey done by LSL Property Services, in July 2014 rent increases in England and Wales exceeded the increase in inflation. According to the survey, inflation as per Consumer Price Index (CPI) increased by 1.9% while rent increased by 2.0%. The statistic implies that rents are growing at a higher rate than other expenses.
What other expenses do you need to bear along with rent?
If you're renting a house, you also need to pay other additional expenses. These expenses include council tax, gas and electricity bills, water bills and service charges. You need to plan for these expenses as well along with planning for rent.
To check how rent can affect your overall household budget, you can use our household budget calculator.