Young Scots renters move back home amid soaring costs

The study for investment managers Fidelity International says that 18-25-year-olds are more likely to make the move with close to a third (31%) of this age group across the UK planning to move back to their family home.

A comparison of 11 regions across the UK, saw 18 to 35-year-olds in Scotland - where salaries tend to be lower and rents cheaper than the UK norm - being the third most likely to move back in with their parents with some 44% either already moved back or planning to do so.

That tied with West Midlands where 44% had either made the shift or proposed to. Renters in London, where salaries and property prices are the highest in the UK - were the most likely to make the move with 46% either already moved or planning to.

According to Rightmove, the average rent in London was £2,343 per month in the third quarter of 2022, the biggest ever annual jump (16.1%). That is over double the average rents in Scotland which was at £910 per month - 13% rise.

In West Midlands average rents are at £1020 per month - a yearly rise of 11%.

According to Statista, average salaries in Scotland in October were at £33,332, while in London it was £41,866 and in West Midlands it was £31,601.

Emma-Lou Montgomery, personal investing associate director at Fidelity International said: “Times are tough with costs rising across the board and young renters are having to consider the different options on the table. While moving back home isn’t feasible or desirable for everyone, considering how people might be able to minimise the costs they have power over is worthwhile.

“For parents and other family members who might have welcomed a loved one back into their home this year, they should ensure they are considering their own finances too. With household outgoings likely to having risen, it’s important to reassess goals. Making sure they revisit plans regularly will allow them to stay on track despite what life throws at the family."

The study found that many are also looking to move in with friends or find properties with more roommates to help spread the cost of their expenses.

Across the UK, more than one in ten (11%) have moved in with friends due to rising costs, with 27% planning to do so in the next year.

In addition, over one in seven have already moved to properties with more people to help manage their bills, and just over a quarter (26%) say they plan on making the same move in the future.

Finding cheaper accommodation is also a priority for many private renters with a third (33%) looking for a more reasonably priced rental property in the next year.

Renters planning to change their living arrangements expect to save £267 a month on average in the UK from their move.

While almost a third (31%) of renters plan to use these savings for immediate needs such as everyday expenses or to pay off debts (21%), many are looking to put the money towards their future plans.

Three in ten (29%) hope to build up their long-term savings, while a quarter 25% are saving towards a house deposit.

Ms Montgomery added: “It’s encouraging that while renters are making the decision to change their living arrangements due to the cost of living crisis many are choosing to use the money they save for longer term ambitions.

"Saving money is getting more difficult so it’s reassuring that renters are being savvy and are thinking about putting money away for the future."

According to a rental prices analysis by Citylets produced last month, housing stock levels, or the supply of private rented properties, reached "historic lows after having recovered mildly in the previous quarter".

The study covering the summer months, Edinburgh saw rent prices increase by 14.7% year on year, while Glasgow’s rents grew by 12.6% in the same period.

Dundee was not far behind with a 12.3% year-on-year spike, while Aberdeen saw prices rise by 8%. However, the Granite City was the only one of the four where rents had dropped over the past five and ten years.

Edinburgh and Glasgow properties are also being snapped up quickly, with the average times to let being just 15 and 13 days respectively.

The real estate rental agency warned in its quarterly report that “alarm bells” were going off over diminishing supply.

Two weeks ago, the Bank of England announced it would increase interest rates by 0.75 percentage points to 3% - the biggest rise since 1989 - as it sought to curb the soaring cost of living.

It comes as painful gas and electricity bill rises in October sent UK inflation surging to a fresh 40-year high.

The Government promised an energy price freeze which, for the average family, would mean typical dual fuel bills would reach around £2,500 per year, although households that used a lot of energy could pay more and people could reduce their bills by using less.

The official UK economic forecaster has warned MPs that “2023 is going to be a very difficult year” for households as bills continue to rise.

Office for Budget Responsibility (OBR) committee member David Miles issued the stark warning days after the body forecast the UK faces a recession lasting more than a year.

Mr Miles said the impact of rising interest rates and continued inflation will cause pressure next year, but they are predicted to turn a corner moving into 2024.

Meanwhile, the average five-year fixed mortgage rate has dropped below 6% for the first time in seven weeks, according to analysis.

Mortgage lenders are offering 5.95% on average for a five-year fixed-rate deal, Moneyfacts.co.uk found.

The average two-year fixed-rate mortgage remains above 6%, at 6.13%.

Mortgage rates rocketed amid market turmoil after the mini-budget in September.

On September 23, the average five-year fixed mortgage rate was 4.75%, and the two-year fix was 4.74%.

By October 20, the average five-year deal was 6.51% and a two-year product was 6.65%.

Rachel Springall, a finance expert at Moneyfacts.co.uk, said: “Borrowers who paused their home ownership plans, or indeed parked the idea of refinancing, may now be tempted to scrutinise the latest deals on offer.

“After the fiscal announcement (on September 23) the average two and five-year fixed mortgage rates rose sharply, but they are edging further away from their daily peak (on October 20).

“However, it is worth noting that rates could fall further still, but there is no clear answer as to how quickly that may be.”

Rises in the Bank of England base rate have been pushing up borrowing costs.

Ms Springall added: “Borrowers may feel they have to be patient for a little while longer yet before they commit to a new fixed mortgage, or even wait until next year to see how the market recovers from the recent interest rate uncertainty.”

A Scottish Government spokesman said: "The Cost of Living (Tenant Protection) Act provides temporary powers to cap rents for private and social tenants and introduces a moratorium on the enforcement of evictions, initially to 31 March. The legislation has been designed to balance the protections that are urgently needed for tenants with some safeguards for landlords, including those who may also be impacted by the cost crisis.

"We know the rental sector needs longer term reform and that is why our New Deal for Tenants sets out proposals to deliver robust rent controls by 2025 and to raise quality and standards in renting – aiming to make sure all tenants enjoy a good experience and recognising the good work of those landlords who provide it.

"This is just part of our work to shield people from the worst effects of the rising cost of living. The Scottish Government has allocated almost £3 billion in this financial year to contribute towards mitigating this crisis, and have just launched a website with information on the wide range of advice and financial support available. Anyone who is experiencing difficulties should contact their landlord or an advice agency to get help as early as possible.”