Renters vs homeowners: COVID-19 struggles compared

author-avatar By on October 21, 2020
Renters vs homeowners: COVID-19 struggles compared

Photo by Erol Ahmed on Unsplash

New research paints a stark contrast between how renters and homeowners coped financially during the COVID-19 pandemic.

The Consumers and COVID-19: from crisis to recovery report by the Consumer Policy Research Centre (CPRC) has found finds higher levels of financial stress among renters when compared to households with a mortgage. 

The results show 75% of renters are concerned about their financial wellbeing compared to 64% of mortgage holders.

Meanwhile, nearly half (49%) of renters expressed concerns about housing costs compared to nearly a third (31%) of mortgage holders. 

Buying a home or looking to refinance? The table below features home loans with some of the lowest variable interest rates on the market for owner occupiers.

Base criteria of: a $400,000 loan amount, variable, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. If products listed have an LVR <80%, they will be clearly identified in the product name along with the specific LVR. The product and rate must be clearly published on the Product Provider’s web site. Monthly repayments were calculated based on the selected products’ advertised rates, applied to a $400,000 loan with a 30-year loan term.

According to CPRC, this exposes "deep cracks" in the Australian housing market. 

"In addition to the disproportionately high financial stress burdening renters, they have also not had the same freedom as homeowners to make their living arrangements more manageable under COVID-19 restrictions," the report said. 

"Adjustments such as renovating a space to make room for parents and children working from home, or welcoming a pet are privileges not afforded to most Australian renters.

"As governments turn efforts towards rebuilding our economy, a sustained focus on the things that will improve the wellbeing, trust and confidence of all Australian consumers needs to be front and centre.

"A home is a home, no matter whether you’re paying a mortgage, or the rent."

Who was more concerned about household bills? 

CPRC's report shows renters had higher levels of concern when it comes to household bills like energy, groceries and credit card bills. 

In total, 47% of renters were concerned about energy bills compared to 29% of homeowners, while the rate of concerns about groceries among renters was nearly double the rate for mortgage holders.    

Renters

Mortgage holders 

Concerns about energy bills

47%

29%

Concerns about groceries

40%

20%

Concerns about credit card bills

39%

29%

Source: CPRC

[Read: Rising energy costs a major concern for 96% of Australian households]

Who missed more repayments: Renters or homeowners? 

Renters again missed a greater proportion of payments across a variety of different sectors due to COVID-19, such as housing, credit, energy and telco. 

As many as 7% of renters missed some rent repayments, while 2% of mortgage holders missed mortgage repayments. 

While most banks offered customers mortgage deferrals for six months or more, renters were only offered an eviction moratorium, and still had to negotiate with their landlords for rent reductions

According to a survey by Better Renting, most who asked for a rent reduction were unsuccessful. 

Renters

Mortgage holders 

Missed housing repayments

7%

2%

Missed credit repayments

10%

3%

Missed energy repayments

9%

3%

Missed telco repayments 

7%

1%

Source: CPRC

CPRC's report supports this, with only 2% of renters saying they were offered payment assistance by their landlord, while 5% of mortgage holders were helped by their bank. 

A higher proportion of renters (16%) "had a negative experience when reaching out for payment assistance" with housing costs, compared to 9% of homeowners. 

Renters more likely to take on more credit during COVID-19

With renters having higher levels of concern about repaying credit compared to homeowners (39% vs 29%), it makes sense that renters also turned to credit and buy now, pay later (BNPL) more than their mortgage holder counterparts. 

According to the results, 37% of renters took on credit or buy now, pay later compared to 26% of homeowners, just to manage basic household expenses. 

Payday loans meanwhile were used by 4% of renters, and 0% of homeowners. 

Renters

Mortgage holders 

Took on credit cards/BNPL

37%

26%

Took on payday loans 

4%

0%

Source: CPRC

Renters dip into their savings, super more 

A sizeable 44% of renters and 28% of homeowners were forced to dip into their savings during the pandemic, while 15% of renters were forced to borrow money from family or friends compared to just 2% of homeowners.

Just under 20% of renters withdrew from their superannuation using the government's early super access scheme, which has now seen more than $33 billion withdrawn across the country

Only 8% of homeowners had to dip into their retirement fund. 

[Read: How to catch up if you've withdrawn your super early]

Renters

Mortgage holders 

Dipped into savings to meet ends meet

44%

28%

Accessed super early 

19%

8%

Borrowed money from family or friends 

15%

2%


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered which includes retail products from at least the big four banks, the top 10 customer-owned institutions and Australia’s larger non-banks:

  • The big four banks are: ANZ, CBA, NAB and Westpac
  • The top 10 customer-owned Institutions are the ten largest mutual banks, credit unions and building societies in Australia, ranked by assets under management in November 2020. They are (in descending order): Credit Union Australia, Newcastle Permanent, Heritage Bank, Peoples’ Choice Credit Union, Teachers Mutual Bank, Greater Bank, IMB Bank, Beyond Bank, Bank Australia and P&N Bank.
  • The larger non-bank lenders are those who (in 2020) has more than $9 billion in Australian funded loans and advances. These groups are: Resimac, Pepper, Liberty and Firstmac.

Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site.

In the interests of full disclosure, Savings.com.au, Performance Drive and Loans.com.au are part of the Firstmac Group. To read about how Savings.com.au manages potential conflicts of interest, along with how we get paid, please click through onto the web site links.

*The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

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William Jolly joined Savings.com.au as a Financial Journalist in 2018, after spending two years at financial research firm Canstar. In William's articles, you're likely to find complex financial topics and products broken down into everyday language. He is deeply passionate about improving the financial literacy of Australians and providing them with resources on how to save money in their everyday lives.

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