Us millennials may have a reputation for being frivolous with our cash, avocado scented candle anyone? But you would need to give up 10,000 £8 brunches, which would take you about 27 years or so if you ate one every day, to afford what one study found is a typical £80,000 housing deposit on a flat in London.
Wherever you are in the country, housing costs hurt. According to the Institute for Fiscal Studies, nearly 40% of 25 to 35-year-olds in Great Britain face a house price to income ratio of at least ten - in other words, the average house price is at least ten times what they earn each year. This can rise to as much as 15.7 times in the most expensive areas. Meanwhile, most people will not be able to borrow more than a maximum of four or five times their salary in a mortgage.
The result is that many people will be renting for a lot longer out of necessity, or out of choice; some may choose to rent because they prefer the flexibility it offers.
Here is what you need to know to rent wisely:
Landlords versus letting agents
The biggest downside to renting through a letting agent, rather than going to a landlord directly, is fees. From 2019 excessive fees that agents are currently free to levy will be banned, these include things like charges for admin and renewal of your tenancy agreement, which can set you back hundreds of pounds. You may still be charged a holding deposit, which will be no more than a week’s rent, and a security deposit, which will be no more than six weeks’ rent.
Going to a landlord directly may offer you more room for negotiation, but you also have less consumer protection. If you rent through an agency, they must be part of a redress scheme such as the Property Ombudsman, The Property Redress Scheme or Ombudsman Services: Property.
Your security deposit is legally protected and your landlord or agent must put it in a government deposit protection scheme within 30 days of you paying it to them.
Landlords can only deduct money from your deposit for damage to your rental property, any missing items and any cleaning costs if you leave it in a worse state than when you moved in. Any damage has to be substantial, normal wear and tear such as scuffs on the wall don’t count.
You should get your deposit back at the end of your tenancy within ten days of you requesting it.
Shelter, the housing charity, has a useful template letter on its site to help you challenge any deductions you think are unfair.
Reduce your bills
Many tenants do not realise that they are free to shop around for the best energy and broadband deals when they move into a new rental. In fact, it is a good idea to do so; you can save hundreds of pounds a year this way. When you move in, ask previous tenants or the landlord who the current supplier is, or if no one is sure, you can find out via the Energy UK website.
Take a meter reading as soon as you arrive. You are liable for any energy used from the date you take over the property, not just from the date when you actually move in. Do not forget to take one when you leave, too.
Add rent to your credit history
Good news for those who have what is known as a “thin” credit file, i.e. you have not been in enough debt to have built up a substantial credit history. You can now add rental payments to show you are a reliable bill payer and they will appear on Experian credit scores. Ask your landlord if they are part of this scheme, if not you can use Credit Ladder or Canopy to report your payments.
Saving money while you are renting
With rent so expensive around the country it is even more vital to budget well and save as much as possible, especially if you are keen to get on the housing ladder. In the Starling app you can set Goals to help you set money aside for a house deposit, if that’s what you’re aiming for. You can also make sure you don’t dip into money needed for rent and bills by moving it out of your main current account as soon as you receive your salary to a separate Goal to prevent the temptation to blow it.
If you are saving for a housing deposit also consider government Isa accounts, such as the Lifetime Isa or Help to Buy Isa, which offer you a bonus that you can put towards a house deposit. Stay tuned for part 2 of this series to find out more about affordable home ownership schemes.