Figures from Scottish Friendly also found that after buying essentials such as housing, energy, water, groceries and transport, the average London household has just £934 left per month to save or use for socialising, clothing or other luxuries.
“For Londoners in particular the cost of housing is a major issue. Keeping a roof over their head accounts for a huge chunk of Londoners disposable income. These day-to-day financial pressures are causing a sizeable minority to spend beyond their means every month," said Calum Bennie, savings expert at Scottish Friendly.
"Consequently less than half of Londoners are able to save regularly. This kind of financial fragility should be a concern for policy-makers and businesses,” he added.
He added that while economic conditions are improving and there is subdued inflation, high employment and gradual increase in wages, these benefits are being offset by the rising cost of living, and particularly the cost of housing.
The median cost of housing in London are £915 per month, which Scottish Friendly says is squeezing households in London and the South East.
The data also found that just half of London households are in a position to save or invest regularly each month.
The report was compiled with the Social Market foundation, analysing consumer sentiment, current economic data and trends to chart UK consumers’ saving and spending habits and the consequent impact on disposable income.