Tenants better off than homeowners during slowdown

Tenants are better placed to ride out the financial pressures caused by the rising cost of living than homeowners, according to new research from MoneyExpert.com.

The independent financial comparison website says per capita expenditure on commodities and services is significantly less for renters than it is for people who have mortgages.

Analysis of the most recent industry data shows that the average tenant spends £133.90 per person per week on commodities and services ranging from food, clothing and transport to alcohol, leisure, phone and energy bills.

But homeowners spend up to 62 per cent more on the same items, forking out on average £216.60 per person per week, MoneyExpert.com says.

The findings come after the Chancellor Alistair Darling urged the international community to take action on commodity prices and suggested employers should limit demands for salary increases to help tame inflation.

But with Britain currently suffering the fastest increase in the cost of food and fuel since the 1970s, MoneyExpert.com warns that the financial pressure on homeowners in particular is likely to increase.

Sean Gardner, director of MoneyExpert.com, commented: "Much has been made of the dilapidated mortgage market and the effects of inflation, and it is true that homeowners are likely to suffer a real change in their standard of living as costs rise."

"But tenants are less exposed to these factors – they don’t have to remortgage; they won’t suffer equity losses as house prices drop; and their per capita expenditure on basic commodities is lower than those of homeowners, too."

"This may explain why the housing market is struggling to recover – people realise that renting is cheaper now and aren’t prepared to run the risk of being on the property ladder."

The MoneyExpert.com analysis assessed the expenditure of households in 13 categories: Food & non-alcoholic drinks; Alcoholic drinks, tobacco & narcotics; Clothing & footwear; Housing fuel & power; Household goods & services; Health; Transport; Communication; Recreation & culture; Education; Restaurants & hotels; Miscellaneous goods & services; and Rent/Mortgage payments.

Commodity or Service Weekly Per Capita Expenditure Tenants Homeowners
Food & non-alcoholic drinks £15.70 £19.70
Alcoholic drinks, tobacco & narcotics £5.10 £4.60
Clothing & footwear £7.30 £11.20
Housing (net) fuel & power £34.20 £13.10
Household goods & services £6.50 £14.70
Health £1.00 £2.10
Transport £14.60 £30.00
Communication £4.70 £5.20
Recreation & culture £14.50 £27.10
Education £1.70 £3.80
Restaurants & hotels £11.50 £17.60
Miscellaneous goods & services £7.70 £17.30
Rent/Mortgage payments £9.40 £50.30
TOTAL £133.90 £216.60

The research showed that there are on average 2.8 people in a ‘homeowner’ household whereas the typical rented household has 2.3 people living in it. However the ‘per capita’ analysis – dividing total household expenditure by the average number of people in each household – shows that tenants spend less per person on some of the basic essentials.

Notes:
* Analysis of bespoke dataset provided by Office of National Statistics. Sample included 4,390 households and 11,470 people, of which 7,950 were adults. Per capita and further analysis conducted by MoneyExpert.com
Source: Family Expenditure Survey and the Expenditure and Food Survey, National Statistics (c) Crown Copyright 2008 Published with the permission of the Controller of Her Majesty’s Stationery Office (HMSO).

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