Lower / middle earners stuck as tenants

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by Gill Montia

A new report on Britain’s “squeezed middle” claims that a radical shift is taking place in the housing market among under 35s in the low to middle income bracket (LMI).

According to the Resolution Foundation, household income for LMIs typically amounts to a net £20,500 and in the last six years, the number of LMIs under 35 owning a home has nose dived from 51% to 34%.

With limited mortgage availability for first-time buyers, historically high house prices and stagnant wages, 47% of this group are finding themselves stuck in private rented accommodation.

For those renting privately, the picture is one of increasingly short supply, rising rents and frequent dissatisfaction with issues from security of tenure to contract charges.

The think tank’s research reveals that 8% of LMI tenants are behind with their rent; 10% are dissatisfied with their current private rented accommodation and over a quarter disagree that the private rented sector is a “good tenure”.

Meanwhile, home-owning LMIs aged under 35 face a precarious future as they contemplate the prospect of higher mortgage payments when interest rates eventually rise.

Overall, 63% of LMI households now own their home on a mortgage or outright, compared to over 70% a decade years ago, and 83% of higher income households now.

Despite low interest rates, mortgage payments snuffle up more than 25% of income for over a quarter of LMI households with a mortgage, and equivalent to over 50% of income for a further 3%.

Part of the reason for this heavy burden of mortgage payments is the number of first-time buyers in the LMI group who bought with a high loan-to-value mortgage prior to the credit crunch.

However, the study concludes that an LMI household would now have to save for 22 years to accumulate a deposit for the average first home, compared to just three years in 1997.