The Aviva Family Finances Report

The Aviva FamilyFinances ReportAugust 2015

The Aviva Family Finances Report4Income Expenditure Savings HousingwealthIncomeFamilyborrowingA look tothe futureRegionalvariationsSpotlightFamily income has continued to rise in the last six months, althoughthe rate of increase has dropped from 5.6% to 4.1%.The typical family now takes home £2,126 a month – £83 amonth more than six months ago, and £192 a month morethan this time last year. With living costs rising at just 0.1%in May according to the Consumer Price Index, after amonth when they fell in real terms for the first time in morethan 50 years, Britain’s families should be under less stressfrom rising costs than they have been for several years.How average income has grownWinter 2013 Summer 2014 Winter 2014 Summer 2015Average income£1,917 £1,934 £2,043 £2,126Six month growth3.2% 0.9% 5.6% 4.1%The figures in this report show that family finances havenow largely recovered from a sustained fall in theaftermath of the global financial crisis. According to Aviva’searlier figures, median family income was at its highest inMarch 2012, at £2,139 a month, and having fallen awayin the intervening period, it is now just £13 a month belowthis previous high point.The income growth figures echo government statisticsshowing wages growing at their fastest rate sinceFebruary 2009. The average weekly earnings for theperiod between February and April 2015 were 2.7% higherthan the same period last year.However, this good news masks a continueddiscrepancy in the wages of different types of family, withsingle parents still scraping by on £1,010 a month: £1,450less than couples with no children. Divorced, separatedand widowed parents are also struggling and have seentheir monthly income fall in the last six months by £236to £1,172. These single parents have the cost of childcareto contend with in many cases, and may be unable to findenough work to give them the income they need.Gingerbread, the single parents’ charity, found in recentresearch that single parents are more likely to beunderemployed – working part-time when they want to beworking full-time – than families with two parents.It also discovered a quarter of these families haveexperienced recent wage falls, despite already earning lessthan the UK average.How different families have been affected by wage growth in the last six months£2,150 £2,221 £2,122 £2,461 £2,016 £2,102 £2,173 £2,192 £1,408 £1,172 £1,034 £1,010-£236 -£24+£71 +£339 +£86 +£19Couples with noplans to havechildrenCouples with plansto have childrenCouples withone childCouples with twoor more childrenDivorced/separated/widowed with one ormore childrenSingle with one ormore childrenWinter 2014 Summer 2015 Actual changeAugust 2015

The Aviva Family Finances Report5Income Expenditure Savings HousingwealthIncomeFamilyborrowingA look tothe futureRegionalvariationsSpotlightThe latest Aviva data shows that the income gap betweendifferent types of families has widened considerably.Couples who plan to have children, but have not started afamily yet, take home £335 a month more than the averagefamily, compared with an extra £79 a month six monthsago. Divorced or separated families are £954 a monthworse off than the average family, compared with £635six months previously, while single parents are now £1,115worse off compared with £1,009 six months ago.How the gap between families has widened.Income by family type against median income+£107 +£95 +£79 +£335 -£27 -£24 +£130 +£67 -£635 -£954 -£1,009 -£1,115Couples with noplans to havechildrenCouples with plansto have childrenCouples withone childCouples with twoor more childrenDivorced/separated/widowed with one ormore childrenSingle with one ormore childrenWinter 2014Summer 2015Income sourcesRecent labour market statistics have shown a growth ofemployment rates among UK adults of working age. Officefor National Statistics (ONS) data for February to April2015 shows that there were 424,000 more people in workcompared to the same period last year. The ONS said thatthe unemployment rate is now 5.5%, down from 6.6% lastyear.The Family Finances Report shows the percentage offamilies receiving an income from a primary job has risenfrom 75% to 76% in the last twelve months. Thepercentage of families receiving an income from a spouse’sjob has also climbed from 37% to 41%.Perhaps as a result, the percentage of families receivingincome from benefits has fallen from 18% to 16% overthe same period, having stood at 19% two years ago.Families benefit from improving outlook for jobs75% 76% 37% 41% 18% 16%Families receiving incomefrom a primary jobFamilies receiving incomefrom a spouse’s jobFamilies receiving incomefrom benefitsSummer 2014Summer 2015August 2015

The Aviva Family Finances Report 47Income Expenditure Savings HousingwealthFamilyborrowingA look tothe futureRegionalvariationsSpotlightThe weekly food shop, hascome down in price from £267a month to £206.August 2015

The Aviva Family Finances Report 48Income Expenditure Savings HousingwealthSavingsFamilyborrowingA look tothe futureRegionalvariationsSpotlightWith family incomes rising and many facing less of a strain from risingprices, the amount families are able to save is higher than ever before.However, our figures show that whilst families are saving moreon average and have far larger savings pots, there are still alarge number of people who are not saving at all.The typical amount saved per month by British families is now£113, up from just £99 six months ago. Despite dipping in thelast six months, the average savings pot has also seen asignificant annual rise to £3,116 compared with £2,274 ayear ago. To put this in a longer-term context, during thecredit crunch in July 2010, the average savings pot was just£636. A savings cushion of this magnitude puts families ona far stronger financial footing.Families saving more per month as savings pots riseSummer 2013 Winter 2013 Summer 2014 Winter 2014 Summer 2015£85£79£85£99£113£2,355£2,016£2,274£3,303£3,116Families saving more per monthSavings pots riseHowever, this good news masks the fact that a significant every month, largely consistent with six months ago (27%).proportion of families are still saving nothing at all, in lineHowever, when the proportion of families failing to savewith the report’s findings that some types of family are stillwas at its peak in October 2011, 39% of families did notstruggling to save and have insufficient income to do so.save or invest anything in an average month, so this stillJust over a quarter of families (26%) are saving nothingrepresents strong long-term progress.Many families put nothing away each monthSummer 2013 Winter 2013 Summer 2014 Winter 2014 Summer 201531% 32% 30% 27% 26%The proportion of families with no savings cushion at all hasremained static at 17% compared with November 2014.While this is a worryingly high number of families with littleprotection against sudden financial shocks, the proportionof families without savings has fallen in recent years. InOctober 2011 as many as a quarter of respondents had nosavings cushion.As families are able to save more, the proportion with asavings cushion of less than £5,000 has fallen. However,45% of families still have under £5,000 to use if theirincome dropped dramatically. This leaves them financiallyvulnerable to a shock such as bereavement or serious illness.A quarter of families (26%) have less than £500 in savings.Percentage of families with less than £5,000 in savingsSummer 2013 Winter 2013 Summer 2014 Winter 2014 Summer 201546%47%48%45%45%August 2015

The Aviva Family Finances Report 49Income Expenditure Savings HousingwealthSavingsFamilyborrowingA look tothe futureRegionalvariationsSpotlightIsa changes affect savings habitsChanges to the Isa limit, aimed at encouraging peopleto use these tax-free vehicles to save, have contributedto an increase in the proportion of families holding theseproducts. Forty-four per cent of families now have an Isa,compared with 41% six months ago.At the same time, the percentage of people usingfixed-rate savings bonds has fallen slightly, indicating thatsome people are finding Isas more attractive, possibly dueto increased limits.Financial products Britain’s families ownWinter 2014 Summer 2015Mortgage 50% 49%Employer pension 46% 44%Life insurance 39% 35%ISA 41% 44%Private pension 22% 19%Health insurance 12% 13%Critical illness 12% 11%Income protection 9% 8%Fixed-term savings bonds 6% 5%Buy-to-let mortgage 4% 3%Payday loan 2% 3%“Families are taking advantage of rising wages and falling living costs to increase theamount they save - in some cases in a dramatic fashion. It is possible they are beingattracted by the government’s new savings incentives to put more money awayfor a rainy day, taking financial responsibility for their own family futures.“However, it is important to note that there are still a significant numberof British families who are not saving at all. As a result, the gap betweenthose families who are well-prepared and protected for any suddenfinancial shocks and those who are not appears to be rising.“While four in ten families have life insurance, this still leaves asignificant proportion unprotected - particularly as nearly half ofBritish families have a savings cushion of less than £5,000. Thismeans an unexpected income loss could be devastating fortheir families.”Louise Colley,managing director, protection, AvivaAugust 2015

The Aviva Family Finances Report 410Income Expenditure Savings Housing Family A look to Regional Spotlightwealth borrowing the future variationsHousing wealthAfter a sustained period of house price growth, conditions havesoftened in recent months, a fact that has been borne out by theresponses to Aviva’s latest research.According to official figures, house prices experienced theirsharpest slowdown since 2006 in April. Prices rose at anannual rate of 5.5%, down from 9.6% in March (ONS).The main cause of this was a sharp decrease in growth inLondon, where house prices grew more slowly than in therest of the country for the first time since 2006.Other leading housing indices have also indicated a slightsoftening in house prices. According to Halifax data, houseprices in the three months to May were 2% higher than inthe preceding three months, the lowest rate of underlyinghouse price growth since January.Annual house price growth, however, rose marginally from8.5% in April to 8.6% and continues to be in the narrowrange of 8-9% where it has been throughout 2015 so far.According to Nationwide, annual house price growthslowed in May, down from 5.2% to 4.6%. Over the longerterm the building society is forecasting that house pricegrowth will converge with earnings growth, which hastypically been around 4% per annum.Aviva’s data bears out a gentler increase in prices, with themedian value of a family home climbing from £183,100 to£183,810 in the last six months (below 1%) compared to a1.5% rise in the previous six months.How housing wealth has increasedSummer 2013 Winter 2013 Summer 2014 Winter 2014 Summer 2015£175,540 £173,450 £180,320 £183,100 £183,810The average size of a family mortgage has also increased inthe last six months, from £58,420 to £64,400, in line withrecent trends. However, this is significantly lower than theaverage of £76,250 three years ago, which may reflect theability of families to pay down debt following wageincreases and lower inflation.While more people have taken on mortgages in the lasttwelve months, levels of homeownership have remainedstable. Just over half – 51% – of British families now owntheir home with a mortgage, while a further 17% owntheir home outright. This compares with 50% and 18%respectively twelve months ago.The proportion of families in privately-rentedaccommodation has risen slightly over the same period,with 17% living in private rentals, compared with aconsistent 16% between the summers of 2013 and 2014.The percentage of families living in social housing is now13%, down two percentage points since May 2014 when15% of families counted this as their main residence.Despite pressure on housing and plenty of publicity abouta ‘boomerang generation’ who return to live with theirparents because of rising costs, a negligible number ofBritish families live in a multigenerational set up, with lessthan one per cent of people questioned in this situation.August 2015

The Aviva Family Finances Report 411Income Expenditure Savings Housing Family A look to Regional Spotlightwealth borrowing the future variationsHousing wealthHow families liveA home we ownwith a mortgageSummer 2013 Winter 2013 Summer 2014 Winter 2014 Summer 201548% 50% 50% 51% 51%Home owned outright 17% 18% 18% 19% 17%Private rental 16% 16% 16% 17% 17%Social Housing 15% 16% 15% 12% 13%Live with family 1% 1% 1% 1% -Despite the value of families’ main homes rising gently,the prices of Britain’s second homes have continued tosoften, but there are signs that this trend has stabilised aftera sharp fall last winter. The average second home is nowworth £107,400, only slightly less than the £109,700 itwas worth last winter.In line with residential properties, the mortgagesoutstanding on second homes have risen from £79,760to £83,230 over the last six months, but this is stillsignificantly lower than the £102,270 seen a year ago. Thismay be partially due to families paying down debt, andpartially to lenders’ reluctance to advance higher mortgagesunder the new rules brought in following the MortgageMarket Review (MMR).The percentage of families that have bought an investmentproperty to prepare themselves for the future has fallenslightly, from seven per cent to six per cent.Percentage of families who have bought an investment propertySummer 2013 Winter 2013 Summer 2014 Winter 2014 Summer 20154% 5% 5% 7% 6%“It is encouraging to see that families are paying downmortgages over the long term, perhaps with the increaseddisposable income that they’ve found since inflation hasslowed. Softening house prices may eventually make it easierfor Britain’s renters to get on their foot on the property ladder,but Britain’s families must still ensure that they haveappropriate contingency plans in place to pay down theirmortgages if their circumstances change.”Louise Colley,managing director, protection, AvivaAugust 2015

The Aviva Family Finances Report 412IncomeExpenditure Savings Housing FamilywealthA look tothe futureRegionalvariationsSpotlightborrowingFamily borrowingDespite rising incomes and lower inflation, there are continued signsthat family borrowing is climbing again which may be due to theincome inequality between different family types.Having fallen significantly from summer 2013 to summer2014, household debt has risen again since November,albeit at a slower pace following a sharp increase six monthsago. In November, the average household debt was £9,050,and it has since reached £9,520.That is far higher than in May 2014, when average debtwas £6,740, and indicates that more favourable economicconditions may not be helping all families to get their debtsunder control.Average household debt climbs againSummer 2013 Winter 2013 Summer 2014 Winter 2014 Summer 2015£16,300 £7,840 £6,740 £9,050 £9,520Families have decreased the amount that they have ontheir credit cards dramatically since November 2014, froma mean of £2,480 to £1,960. There is also less evidence offamilies leaning on payday lenders and pawnbrokerscompared with November 2014. The average amount owedhas fallen from £450 to £370 in the case of payday loans,and the average owed to pawnbrokers is also down from£420 to £300.However, the size of families’ personal loans has continuedto increase from £1,680 to £2,190 over the last six months.Overdrafts have also risen from £740 to £870: more than2.5 times the £340 owed in May 2014 and almost back tothe level seen two years ago.There are also signs of families leaning more on other familymembers or friends for support, as the average loan of thistype has risen from £930 to £1,230 in the last six months.Average overdraft leapsSummer 2013 Winter 2013 Summer 2014 Winter 2014 Summer 2015£890£650£340£740£870August 2015

The Aviva Family Finances Report 413Income Expenditure Savings HousingwealthFamilyborrowingA look tothe futureRegionalvariationsSpotlightIn November 2014, the averagehousehold debt was £9,050,and it has since reached£9,520.August 2015

The Aviva Family Finances Report 414Income Expenditure Savings Housing Family A look to Regional Spotlightwealth borrowing the future variationsA look to the futureThe financial concerns of Britain’s families are slowly changing,in response to falling inflation and the increasing prospect ofinterest rates rising.With inflation now extremely low, fewer families areworried about increasing prices for basic necessities, downfrom 63% two years ago to 51%.In place of inflation concerns come fears over rising interestrates, since many families have become accustomed topaying mortgages with rates at record lows. Over two years,the fear of rates rising is up six percentage points from 16%to 22%.With retirement provision and taking responsibility forinvesting for the future increasingly in the news, perhaps itHow financial concerns have changed in two yearsis unsurprising to see renewed concerns over puttingmoney away.Families are increasingly concerned about low rates onboth their savings and their investments. The number offamilies worried about low savings rates has crept up bytwo percentage points in the last two years to 16%, despiteindications of a possible bank rate rise on the horizon. Atthe same time, 9% are concerned by loss of income frominvestments, up two percentage points from summer 2013.Significant increase in the price of the basicnecessities for living (e.g. food or utilities)51%63%-12Unexpected expenses(e.g. major repairs to home)55%60%-5Serious illness(for me or my partner or children)27%32%+5Loss/changes to currentGovernment benefits20%23%-3Higher mortgage rates16%22%+6Breakdown of relationship13%14%-1Lower savings rates on savings16%14%+2Inability to keep up withany debt repayments10%14%-4Continued unemployment9%8%+1Paying for significant expensessuch as university8%10%-2Loss of income from investments9%7%+2Families with this concern – Summer 2015 Families with this concern – Summer 2013 Two year change in percentage pointsAugust 2015

The Aviva Family Finances Report 415Income Expenditure Savings Housing Family A look to Regional Spotlightwealth borrowing the future variationsA look to the futureEncouragingly, some people are taking steps to respondto these threats, using increased income to combat them.Aviva’s research shows that the percentage of people with arainy day fund remains significantly higher than it was twoyears ago, with 43% paying into such a fund, although thishas dipped slightly over the last six months.Rainy day funds soar - percentage of families paying into rainy day fundsSummer 2013 Winter 2013 Summer 2014 Winter 2014 Summer 201535% 34% 36% 44% 43%Strong stock market performance and interest aroundpensions and investments in general appear to have buoyedappetite for investments over the last two years. Thepercentage of people investing in shares and bonds hasrisen by two percentage points to 15% over this period.The number of people paying into an employer pensionhas dipped from 34% to 31% over two years, butencouragingly, the percentage who say they have made nofinancial preparations for the future has also dropped from25% to 23%.August 2015

The Aviva Family Finances Report 416Income Expenditure Savings Housing Family A look to Regional Spotlightwealth borrowing the future variationsRegional variationsSummaryAs might be expected, regional differences abound whenit comes to savings, housing wealth and income. Despitea softening of house prices in the capital, Londoners stillhave the highest incomes, savings pots and most expensivehomes.The lowest incomes in the UK can be found in the EastMidlands and the North East, where average monthlyincomes now stand at £1,830 and £1,795 respectively.The average Londoner’s income, at £2,739 a month, is 53%higher than the average income in the North East.Assets and savingsFamilies in the capital continue to have the largest savingspots (£11,250), perhaps reflecting their higher incomes andneed to ensure that they could maintain their lifestyles in acrisis. The smallest family savings pots are in Wales at £875.Those in London and the South East are the most likely toown stocks and shares investments, with 21% of those inthe South East and 20% of those in London holding theseinvestments. Families in the South East are also the mostlikely to have private pensions, with uptake of 24% aheadof 23% in the South West, 21% in both London andYorkshire, and just 12% in Wales and the North East.London’s position as the home of the greatest proportion ofbuy-to-let (BTL) mortgage holders also appears to have beenusurped. Five per cent of those in the West Midlands nowhold a BTL mortgage against 4% in London. Six monthsago, 7% of Londoners held a BTL mortgage.Financial fearsDespite having the highest outstanding mortgages, only18% of Londoners are concerned about rising mortgagerates, compared with 25% of people in the North East. Fearof unexpected expenses is greatest in Yorkshire, where 68%of people listed this as one of their top three concerns.HousingLondoners have the highest outstanding mortgages, atan average of £141,350. In contrast, those in Wales haveaverage mortgages of just £33,170. Families in the SouthEast are the most likely to have a mortgage at 53%,compared with 43% in the North East.Unsurprisingly, the highest house prices are also in London,where the average family house price is £329,400.However, this is down from £335,190 six months ago,indicating some regional price softening. This is still two anda half times more than the average family house price inWales, which is £132,950.Londoners are the most likely to have had family help withbuying their current home. One in five London homeowners(20%) with mortgages have received money gifted byfamily to fund their deposit, against just 5% in the SouthWest. Eleven per cent of Londoners used an inheritance astheir deposit, against 3% in the West Midlands.August 2015

The Aviva Family Finances Report 417Income Expenditure Savings Housing Family A look to Regional Spotlightwealth borrowing the future variationsRegional variationsAverage monthly incomeAverage total savingsAverage house valueSCOTLAND£2,136£3,100£143,750£1,795£2,000£143,750NORTHEAST£2,100£1,885£1,992£2,912£142,500YORKSHIRE£163,890NORTHWEST£1,830£1,967£875£1,875£132,950WALES£2,313£155,560£2,030WESTMIDLANDSEASTMIDLANDS£148,960EAST OFENGLAND£2,116£3,833£217,500£2,739£3,682£1,973SOUTHWESTSOUTHEASTLONDON£329,400£11,250£196,090£239,000£2,417£4,375August 2015

The Aviva Family Finances Report 418Income Expenditure Savings Housing Family A look to Regional Spotlightwealth borrowing the future variationsSpotlight: Home Sweet HomeOur homes may be our castles, but issues of home rental andownership across the UK have proved complex for many familiesin recent years.Rising house prices have put homeownership out of reach formany people, especially the young. A recent survey from ThePost Office put the average age of a first-time buyer at 35.Meanwhile, rising rents are also making it increasingly hardfor families to save for a deposit to buy. Average rents acrossEngland and Wales hit a record high of £774 in April – or arecord £1,204 for London.Despite it being difficult for many people to buy the homethey want, this issue of the Family Finances Report revealsthat we continue to cherish our homes, and want to improvethem. Homeowners in particular report high levels ofemotional attachment to their properties. Around a third ofhomeowners – whether they have a mortgage or own theirproperty outright – describe themselves as emotionallyattached to their homes, compared with 18% of privaterenters.However, rising prices mean that many people have come toview their home as a valuable asset too. Nearly a third (30%)of those who own their home with a mortgage see it as aninvestment, and 26% of homeowners plan to pass on theirproperty to their family.Many families are hoping to either move to a larger propertyor to improve their homes. Over half (55%) of homeownersplan to improve their home in the next five years, while a fifthare planning to move within the same time period.The most likely improvements for people to make are theinstallation of new kitchens and bathrooms. For those forwhom money is not an issue, popular improvements includeextensions, new kitchens and loft conversions.How we feelabout our homes50%feel their homecurrently perfectlysuits their needs28%feel emotionallyattached to theirhome20%view their homeas an investment20%would like to stayin their currenthome for the restof their lives19%would eventuallylike to pass theirAugust home 2015on as aninheritance

The Aviva Family Finances Report 419Income Expenditure Savings Housing Family A look to Regional Spotlightwealth borrowing the future variationsSpotlight: Home Sweet HomeMost likely improvements to make23% 18% 14% 11%New kitchen New bathroom Garden makeover Extension7% 6% 2%ConservatoryLoft conversionWoodburning stoveDespite the popularity of open-plan living and eat-inkitchens, 73% of families still believe that their living roomis the heart of their home, compared with 15% who believethat the home has the kitchen at its heart.Which room isthe heart of thehome?4%Home does nothave a heart73%Living room1%Conservatory15%Kitchen1%Hall3%Bedroom3%Dining roomAugust 2015

The Aviva Family Finances Report 420Income Expenditure Savings Housing Family A look to Regional Spotlightwealth borrowing the future variationsSpotlight: Home Sweet HomeHomes and possessions at riskDespite our love of our homes, which are full of ourtreasured possessions, Aviva’s research reveals that weare failing to protect them with adequate insurance. Only69% of families insure their home contents and 82% ofhomeowners (including those with a mortgage and outrightowners) hold buildings insurance. This leaves a significantminority at risk of burglary and damage to their homes.Meanwhile 35% have life insurance, 8% have incomeprotection cover and 11% critical illness cover. Withoutthese products, homeowners and renters alike risk fallinginto debt if they become ill or lose their jobs, and losingtheir properties as well in extreme cases.Renters are less happy in their homes, and more vulnerableAviva’s survey of Britain’s families reveals widespreaddifferences between those who rent and those who havemanaged to buy a home.Thirty nine per cent of renters feel that their home suitstheir needs, compared with 52% of those with mortgagesand 54% of those who own their home outright. Rentersare also less likely to feel emotionally attached to theirhomes, with 18% saying they felt this way compared with32% of mortgagees and 34% of outright homeowners.The majority of those who do not own their homes wouldlike to do so, with 64% saying this was their ultimate goal.Renters are also revealed as more financially vulnerable.They are less likely to have a cushion of savings orinsurance against financial shocks.Those in rental accommodation are significantly less likelyto have contents insurance for their homes, despite the factthat they still need to ensure that their possessions are safe.They are also less likely to be putting money away for thefuture in a pension or Isa.Perhaps unsurprisingly, renters are far less likely to have lifeinsurance than those with a mortgage that would need tobe paid if the worst happened. However, renters would stillneed to pay accommodation costs if they suffered an injuryor illness which prevented them from working or worst still,were faced with a bereavement.Renters are more financially vulnerableFinancialproduct heldSavings account78%84%83%Home contentsinsurancePensionsISALife insurance20%25%32%31%42%49%51%48%48%60%77%81%Private healthinsurance10%12%16%Criticalillness coverIncomeprotection/employment cover4%5%3%5%12%17%RenterHomeowner (outright)Homeowner (mortgaged)August 2015

The Aviva Family Finances Report 421Income Expenditure Savings Housing Family A look to Regional Spotlightwealth borrowing the future variationsSpotlight: Home Sweet HomeSingle parents more likely to be rentersCertain types of family are more likely to be living in rentalaccommodation than others, with single parents – whowe have already seen in the report are struggling when itcomes to income levels – more likely to be renting.52%57%45%20% 16%22%11% 17%Couples withone childCouples with twoor more childrenRenting Own with mortgage Own home outrightDivorced/separated/widowedwith one or more children26%12% 18%9%Single with one ormore childrenWhy can’t renters buy?Scraping together the deposit to buy a home is proving amajor barrier to would-be homeowners getting onto theproperty ladder. Thirty per cent said they could not affordthe deposit or fees to buy a house, while a further 23%said that the high cost of living makes it too hard to save toget onto the property ladder.Why can’t would-be buyers buy? (main reason only)9%9%11%19%23%30%We would beunable to affordthe monthlyrepaymentsOtherWe are unableto save becausethe rent is tooexpensiveHouse prices aretoo expensiveThe cost of livingmakes it too hardto saveWe are unable toafford the depositand fees to buy ahouseTwo thirds (64%) of people who do not currently own butwould like to, are not saving to buy a home, with only 36%doing so. The percentage of people saving to buy a home isHow are people financing their deposits?highest in London at 57%. Of family types, those who areplanning to have children are most likely to be saving to buya home, with 61% taking this course of action.Of those who have bought their own home, the majority(55%) saved in order to afford their deposit. However, asignificant minority, (11%) relied on gifted money and a further6% on an inheritance. In London, where house pricesand deposits are typically far higher, 20% rely on moneygifted by family members and 11% on inherited money.Savings 55%Selling previous home 34%Money gifted by family 11%Inheritance 6%Money borrowed from family members 6%Government Help to Buy scheme 3%Other 10%August 2015

The Aviva Family Finances Report 422Income Expenditure Savings Housing Family A look to Regional Spotlightwealth borrowing the future variationsSpotlight: Home Sweet HomeWhere is the averageAviva customer living?Aviva’s own data shows that the average home is asemi-detached property built in the 1930s, with threebedrooms and one bathroom, and owned with amortgage. The most common name for a home inthe UK is The Cottage. Those aged over 45 aremore likely to live in a detached house than a semi.“Homeownership has always been an important part of the Britishpsyche and our study of how we use our homes shows that this has notchanged. Those who rent their properties are less likely to be satisfiedwith them, and most are wanting to buy. However, with rents at recordlevels, many are struggling to scrape together the deposit needed tobuy a property.“Our research reveals that renters are more financially vulnerablethan homeowners, and less likely to have a savings cushion orinsurance against shocks such as bereavement. However, theseproducts are just as important for renters, since families will stillhave to pay for their housing if the worst happens.”Louise Colley,managing director, protection, AvivaAugust 2015

Income Expenditure Savings HousingFamilyborrowingA look tothe futureRegionalvariationsSpotlightThe Aviva Family Finances Report 423wealthSpotlight: Home Sweet HomeAugust 2015

The Aviva Family Finances Report24Income Expenditure Savings HousingFamilyborrowingA look tothe futureRegionalvariationsSpotlightwealthSo what does this tell us?Louise Colley,managing director, protection, AvivaThis summer’s Family Finances Report shows a widening gapbetween Britain’s haves and have nots.On the one hand, increased wages and a lower inflationrate means that many British families are more able to preparefor the future. They are saving more than everso that, if a rainy day comes, they have funds and supportin readiness.However, the playing field is far from level. Certain familytypes remain exceptionally vulnerable, with the gapbetween the average income and the income for singleparent families widening in the last six months. And whiledebt repayments have increased, so has the averageamount of borrowing – suggesting that families arestruggling to wean themselves off a diet of credit toboost their incomes.While many are increasing their savings, some are notsaving at all. The average amount saved per month byBritish families is now £113, up from just £99 six monthsago. The average savings pot has now stands at £3,116,up from £2,274 this time last year – an increase of 37% in12 months.However, the percentage of families who aren’t puttinganything away at all each month has stayed broadlyconsistent – dipping from 27% to 26% over the lastsix months.Despite softening house prices, particularly in the capital,housing wealth for Britain’s families has continued to risealthough the average price of second properties has notfared as well as main family homes.Financial fears for British families are changing in responseto a shifting economic landscape. More are concernedabout rising mortgage rates, and fewer worry about therising cost of living. With saving for retirement firmly in thespotlight, concerns about the performance of investmentshave risen too.This summer’s Family Finances Report represents a morerobust picture for Britain’s families – with higher savingspots and increased disposable income. However, it isimportant to remember that, for some types of family inparticular, financial vulnerability is still a real concern.Louise Colley,managing director, protection, AvivaAugust 2015

The Aviva Family Finances Report25Income Expenditure Savings HousingFamilyborrowingA look tothe futureRegionalvariationsSpotlightwealthMethodologyOver 2,000 people aged 18-55 who live as part of one of sixfamily groups were interviewed to produce the report’s latestfindings.In total, 26,000 UK consumers have been interviewedbetween December 2010 and May 2015. This data wascombined with additional information from the sources listedbelow and used to form the basis of the Aviva FamilyFinances Report. All statistics refer to figures released inAugust 2015 unless stated otherwise.Additional data sources include:• Office for National Statistics• Gingerbread• Nationwide House Price Index• Halifax House Price Index• LandlordExpert.co.ukTechnical notes• A median is described as the numeric value separatingthe upper half of a sample, a population, or a probabilitydistribution, from the lower half. Thus for this report, themedian is the person who is the utter middle of a sample.• An average or mean is a single value that is meant totypify a list of values. This is derived by adding all thevalues on a list together and then dividing by the numberof items on said list. This can be skewed by particularlyhigh or low values.• Due to a change in research methodology, some medianvalues from previous reports have been re-calibrated inthis edition to allow direct comparisons with previousyears.For further information on the report or for a comment,please contact Sarah Poulter at the Aviva Press Office on01904 452828 or sarah.poulter@aviva.co.ukAugust 2015

August 2015 © Aviva plc