Renting in your 40s? Be sure to get the best deal
A typical image of ‘generation rent’ may feature 20-something professionals trapped in rundown properties, battling ever-increasing bills. But there are growing numbers of people in their 40s forced to flatshare, with figures showing a surge in older renters priced out of the property market.
According to the latest Department for Communities and Local Government’s English Housing Survey, there are more over-35s renting than ever before. Almost a third (29.3%) in this age group rent – a jump of close to a fifth from 2004. Almost one in 10 flat and house sharers are now aged over 45, according to flatshare site SpareRoom.co.uk.
Like younger wannabe buyers, they are locked out by soaring property prices, high rents and stagnant incomes. Figures from the Association of Residential Lettings Agents show that UK tenants spent an average of 22% of their salary on rent last year. Housing charity Shelter says that the cost of renting a two-bedroom house in England amounts to an average of £41,196 over the past five years.
Campbell Robb, Shelter’s chief executive, says: “With our housing market out of control and rents sky-high, it’s no surprise that more and more people are finding themselves trapped in private renting well into their 40s.”
The average monthly rent in London stood at an eye-watering £1,596 last year, compared to £604 in Sheffield and £636 in Glasgow, according to tenant referencing and lettings insurance company HomeLet. When sums like that are being swallowed up, stumping up deposits to buy a property can seem an impossible task.
However, you may have some rental negotiating power in your 40s, says Matt Hutchinson, director of SpareRoom. “Many people in their 20s and 30s don’t necessarily want to live in a party house, and even social butterflies may crave peace and quiet at home.”
A stable working life and pride in your living space can be an advantage, he adds.
“When approaching house shares you want to view, you don’t have to lead with your age – it’s not as important as other factors such as your lifestyle and working hours.”
Campaigners partly blame tougher mortgage criteria for some of the struggles older people face getting on to the property ladder. Dan Wilson Craw, policy and communications manager at campaign group Generation Rent, says: “People could be facing a lifetime of living in the expensive and insecure private rented sector.”
Yet he adds that those in their 40s could attempt to negotiate longer-term rental contracts. Typically, these span a year, but it’s possible to ask for, say, five or seven years. “If you have kids, they might need to go to a local school, and landlords may want a long- term tenant,” says Mr Wilson Craw. “You could also negotiate terms on rental increases to avoid these altogether or minimise them.”
Missing the boat
Helen and Richard Easton, 43 and 35 respectively, are among the families battling soaring prices. They live with their two children Cerys, four, and Lochlan, eight months, in Stroud Green, north London.
Despite both having high-flying careers – she is an academic and he is a criminal solicitor – they say they have “missed the boat” on buying a property.
“We’ve rented for about 16 years, and despite being close to buying several times, we haven’t ever found the timing or requirements that have made this possible,” says Helen.
They currently rent a one-bedroom flat for £1,340 a month. “But we manage to make this work by using a living area to turn it into a two-bed, and it’s actually cheap for the area so we feel lucky.”
The couple were “close to buying”, but their financial situation became less secure. “We had the 5% deposit, but ￼￼￼￼￼￼essentially no salary to get a mortgage – as Richard had just finished his training contract, and then I was made redundant three months into maternity leave,” she says.
They were then forced to use some of their savings to make ends meet. “We don’t have family help, and the £30,000 pot we had was diminishing,” she says. “We need a home with outdoor space and while we’ve looked into shared ownership, they’ve often been very small properties.”
Their solution is to consider moving to Australia, where Helen’s family live. “We can live rent-free in my childhood home, which will enable us to save.”
When those in their 40s do come to buy, they face particular hurdles, stresses David Hollingworth of mortgage broker London & Country.
“Borrowing over terms beyond anticipated retirement age raises questions about what your income might be. While there are lots of deals that require a 5% deposit and these deals have been improving, this is still a large sum given property prices.
“There are options out there that may help, such as shared ownership, the announcement of the starter home initiatives for discounted homes, and Help to Buy, but this still risks leaving a generation who might be unable to buy a home.”
Schemes to give you a leg-up
Changes to salary thresholds in April make shared ownership properties available to householders earning less than £80,000 outside London and £90,000 within the capital.
Help to Buy equity loans
Borrowers need to stump up 5% of the value of a new-build property, but can borrow a further 20% from the government on an interest-free basis for the first five years. The loan is repaid when the property is sold.
These loans are available to anyone wanting to buy a new-build. So if you’ve owned before, you can still take advantage of this scheme to get back on the housing ladder.
London Help to Buy
This is essentially the same as the government’s Help to Buy equity scheme. However, it offers a more generous loan of up to 40% of the value, given sky-high prices in the capital. Buyers need to take out a mortgage for up to 55% of the property’s value to cover the rest.
Help to Buy mortgage guarantee
Here, the government guarantees mortgages of up to 95% loan-to-value. This scheme is set to end in December 2016. Increasing numbers of 95% deals on the market are encouraging for anyone saving the cash towards a deposit.
Help to Buy Isa
Anyone who has yet to buy a property can use these accounts to give their savings a tax-free boost. For every £200 you save, the government adds £50, up to a maximum of £3,000. Halifax and Santander currently offer the best rates at 4% – but there are plenty of accounts on offer.
“It's got tougher”
Another trapped renter is Jane Culverhouse (pictured above). At 45, she’s living in shared flat in Hainault, east London, with two men in their 20s. She was forced back into the rental market after getting divorced four years ago. Previously she owned a shared ownership property with her ex-husband, but when they split up he bought her out.
Jane works as a supermarket manager and pays £90 a week (£4,680 a year) for a room in the three- bedroom house. She says: “I’ve been living here for a year, and it can be very tricky when you’re used to having space and the choice to paint a wall whatever colour you like. You have to be quite diplomatic. I think my housemates thought I’d do the housework when I moved in, so it’s give and take.”
She adds: “I’d hate to be a young person now – I have a 19-year-old daughter at university and I feel there’s little hope of her ever buying a home.”
Jane’s considering relocating to Staffordshire with her new partner. “Our budget for a home is between £180,000 and £210,000. It’s got a lot tougher to get a mortgage though, and the deposit is such a big hurdle.”
Your rights as a tenant
Remember that you have particular rights as a tenant.These are worth checking before signing any rental contract, at any age.
- Since 2007, your deposit must be protected in a government-approved scheme – either the Deposit Protection Scheme, MyDeposits or the Tenancy Deposit Scheme. Failure to do so means you could be able to claim compensation of up to three times the value of the deposit. If the landlord wants to take any money from your deposit at the end of a tenancy, and this is disputed, it must be through an independent resolution process.
- You must be provided with an energy performance certificate, gas safety certificate and a ‘How to rent’ booklet – for further details, contact Gov.uk/government/publications/how-to-rent.
- The most common form of tenancy is an Assured Shorthold Tenancy (AST), which usually runs for six months or a year. If the landlord wants you to leave when the AST ends, they have to complete a section 21 notice two months before the last day of the fixed term. If a tenant wants to leave the property at the end of the agreement, they typically have to give their landlord one month’s notice if they pay their rent monthly or four weeks’ notice if they pay weekly.
- You have a right to demand that the structure and exterior of the property is maintained, and smoke alarms are fitted on every floor. If they aren’t, ask for them to be installed. Appliances and furniture must also be maintained.
- You have rights to enjoy the property as your home – so landlords must give at least 24 hours’ notice of visits. They cannot walk in whenever they like.
Invidivual Savings Accounts were introduced on 6 April 1999 to replace personal equity plans (PEPs) and tax-exempt special savings accounts (TESSAs) with one plan that covered both stockmarket and savings products, the returns from which are tax-exempt. The ISA is not in itself an investment product. Rather, it’s a tax-free “wrapper” in which you place investments and savings up to a specified annual allowance where the returns (capital growth, dividends, interest) are tax-exempt (you don’t have to declare ISAs and their contents on your tax return). However, any dividends are taxed within the investment, and that can’t be reclaimed.