Money Wellness
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calendar icon07 Aug 2023

Renters ‘more likely to suffer from rising interest rates’

Rising interest rates are likely to cause more problems for renters than mortgage holders, it has been suggested.

Although the focus tends to be on mortgage holders after an interest rate rise, the latest increase in the base rate from 5% to 5.25% will probably hurt renters more, according to Bank of England analysis.

The Bank explained this is because renters tend to be less financially resilient than other households.

Why renters are suffering 

Renters generally spend more of their money on housing and have lower incomes and savings than other households. In the first half of the year, a quarter of renters said they had no money set aside and half had less than three months’ worth of rent in savings, according to a survey by financial advice group NMG.

As well as other cost-of-living pressures, many tenants are facing rising rents as landlords look to pass on higher mortgage and regulatory costs.

Renters also typically have high amounts of unsecured debt. This includes about 30% of persistent credit card debt.

According to the Bank’s analysis, the gap between renters and other households is likely to widen. Growing housing costs may force renters to save less or borrow more. They may also find they have to spend a higher proportion of their income on debt repayments. The Bank suggested this will see more renters facing hard financial choices – such as defaulting or cutting back on spending.

Figures from the Money Charity show 36% of social renters and 23% of private renters are already in serious financial difficulty.

If you’re struggling

If your landlord wants to put your rent up, it’s good to know your rights. In most circumstances, they can only increase it once a year by a reasonable amount. Find more information on your rights and what to do if you’re struggling to pay. 

Read our blog on how to manage rising rents and mortgage interest rates for budgeting ideas and information on getting support if money worries are affecting your mental health. 

You can also use our free benefits calculator to check you’re getting all the financial support you’re entitled to.

If you’re on a low income or claim benefits, you may be able to get a council tax reduction of up to 100%. Check to see if you’re eligible.

Local councils have also been given a share of £842m to help families struggling with the cost-of-living crisis. Visit your local council’s website to see what’s available in your area.

And if you need debt advice, we’re here 24/7 online, or you can give us a call during our office opening hours. You don’t have to face money worries alone. Get in touch today.

Avatar of Rebecca Routledge

Rebecca Routledge

A qualified journalist for over 15 years with a background in financial services. Rebecca is Money Wellness’s consumer champion, helping you improve your financial wellbeing by providing information on everything from income maximisation to budgeting and saving tips.

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