The number of renters actively saving for a property deposit has fallen to its lowest level in six months as rising living costs and rent inflation continue to squeeze disposable income.

According to Barclays Property Insights just 17% of renters were saving for a deposit in July, down from 31% in January.

The drop comes amid a 5.2% annual rise in rent and mortgage payments, alongside a 2.7% increase in utility spending.

AFFORDABILITY GAP

The data highlights a growing affordability gap between renters and homeowners. While property costs account for 30.8% of renters’ take-home pay, mortgage holders spend a lower share, at 26.6%.

Income disparity is a key factor: the average gross income reported by homeowners is £37,775 compared to £23,562 for renters.

Confidence in homeownership is also weakening. Just 12% of renters believe they will be able to buy a home within the next year, rising only slightly to 16% over five years. In June, 19% believed a five-year timeline was achievable. House prices have now overtaken deposit size as the leading barrier to entry.

COST PRESSURES

Cost pressures are forcing renters to cut back or seek additional income. Among those trying to save, 14% are reducing discretionary spending, 11% are cutting back on holidays, and 8% are using side hustles to boost savings.

Affordability concerns are also shaping behaviour. Almost half (45%) of those hoping to buy say they aim to save more to reduce future mortgage repayments. Only 12% would consider entering the market with a smaller deposit and higher borrowing costs. A third (34%) are willing to downsize their home ambitions, while 16% would use all their savings to get on the ladder, rising to 20% among millennials.

Despite interest rate cuts earlier this year, more than half of consumers (55%) believe renting is more expensive than paying a mortgage. Yet nearly half of renters (45%) say they have already adjusted their spending to cope with rising housing costs, and 26% are struggling to meet their monthly payments — underlining the widening financial strain on aspiring homeowners.

DEPOSIT WOES

Jatin Patel, Head of Mortgages, Savings and Insurance at Barclays, says: “Many people dream to one day own a home, but our latest findings highlight how renters are finding it ever harder to save for a deposit while keeping up with rising costs.

“More positively though, we’re still seeing savers create strong habits, and consider carefully the balance between getting into the market quickly with a lower deposit or trying to minimise monthly repayments in the longer term.”

IMPORTANT POSITIVES

Will Hobbs, Managing Director, Barclays Private Bank and Wealth Management, adds: “The UK economy remains in a better place than the public debate would suggest.

“While there is, as usual, much to worry about, the fact that real (inflation adjusted) household incomes continue to grow briskly remains an important positive, as is the still substantial arsenal of ‘excess’ savings.

“The key to unlocking this pent-up spending power is confidence, a difficult factor to measure and to forecast. There is always much that can go wrong in the path ahead, but it was ever thus.

“Hindsight happily tells us that even the blind optimist has triumphed over the sober pessimist for most of the last several centuries. For the UK’s economic outlook at the moment, the causes for optimism are more substantial than widely acknowledged.”