The cost-of-living crisis is dashing the hopes of aspiring homebuyers and increasing reliance on the private rented sector, research by Paragon Bank has found.

A survey of over 2,000 people who currently live in privately rented homes revealed that just over one third (35%) were actively saving to buy a home, with the majority of these (73%) in the process of saving for a deposit.

When asked to consider the impact of the cost-of-living crisis on a range of different financial behaviours, over half of these aspirational homebuyers (56%) expressed reduced optimism in their capacity to save for a deposit, either responding that they were only slightly confident or not confident at all.

Aspiring homebuyers were also asked when they expect to buy a home. The majority – four in 10 – of those who feel it is unlikely that their saving will be impeded predicted being ready to purchase in the next one to two years. A similar proportion (44%) of those who are not confident in raising the funds for a deposit said they expected to buy a home within three and five years – the most common timeframe among this cohort.

Over a quarter (28%) of those who are confident in their deposit-raising ability expected to buy a home within the next six to 12 months, falling to one in 10 among those who felt their capability would be compromised.

Richard Rowntree, managing director for mortgages at Paragon Bank, commented: “Our latest tenant research confirms the logical expectation that the pressure placed on household finances will limit the capacity for some people to save for the deposits necessary to buy their own home.

“This has implications for the private rented sector because a sizeable proportion of these aspirational homebuyers will remain in rented properties for longer while they battle the rising cost of living to put aside funds needed to secure a mortgage. In turn, this will place further pressure on the supply of rented homes which is already surpassed by demand, exacerbating rising rents and limiting choice for tenants.”