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Fifty percent of take home pay is being spent on rents in the capital and south east says a survey

Date: (12 September 2012)    |    

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A survey by Rightmove says about 30% of tenants in the south-east were spending more than 50% of their take-home pay on rent.
The rental market was overheating as a third of tenants in the South-east and London were paying more than 50% of their take-home pay to landlords according to the property website Rightmove.
The average rents were continuing to spiral upwards as the monthly cost of a typical flat in the capital was jumping 2.3% in August alone and 5.8% over a year.
The market scene has now raised the fear of a new generation of ‘trapped renters’ who were so cornered by the increasing rents that it is being seen as virtually impossible for them to think of saving a deposit for a new home.
Miles Shipside the director of Rightmove, said that these trapped renters who were spending large part of their income for paying rents had little prospects of saving any for a deposit. Rightmove is estimating a 31% of tenants in the south east and 29% in London were already spending more than half of their take home pay on rent.
Last week the government promised £300m in funding for 15,000 homes for first-time buyers, but at the same time relaxed rules on builders who complain sites were not profitable if they are forced to build affordable homes.
But the lack of finance for young borrowers, particularly those unable to save for a large deposit, added to the generally high level of house prices, remained the crux of the issue. The Financial Services Authority said yesterday that new lending for house purchases continued to stagnate at about £40bn in the second quarter of 2012, the same level as last year.
A very small part of the lending was actually going to the people with small deposits or those who need a large multiple of their salary to afford a home.
The FSA said just 2% of mortgages were granted to buyers with a deposit of 10% or less.
Last month, the government's Funding for Lending scheme began, aimed at driving down the cost of loans for businesses and homebuyers, but so far there was little evidence of falling rates.
Housing analysts deem tenants in many parts of the country were being stretched to limits on how much more they could afford to pay. HomeLet, which examines tenant's incomes to check they can afford to pay, found average earnings were down 0.1% on a year ago. It would be interesting to see how long they'll be able to afford the continually rising living costs," said Ian Fraser, managing director of HomeLet.
Meanwhile, landlords were enjoying bumper incomes as tenants struggle. Rightmove estimated the "yield" on investment properties was now running at an average of 6% across the UK, or more than double the amount investors can typically earn on a savings account.