It is harder to get on the property ladder than it is to rent however buying a home costs less than renting. The average mortgage payments are LESS than the average rent payments.
Over the last 5 years we have seen both rental and mortgage payments increase. The average rent cost has grown by 8% more expensive each month with an annual difference of £672. If you look back at figures a decade ago, rent was significantly cheaper each month than having a mortgage with a 16% difference between the two.
Why is Renting more expensive than buying?
Trends have forced many to rent:
- Market value can price many out of a home they need.
- Landlords being able to afford higher offers can beat those with residential mortgages.
- Over all the demand or buyers being higher than the property supply.
This means the demand for rental properties is high so the market is competitive which leads to higher rents. Interest rates have been 0.5% for over 6 years, bringing down the average mortgage repayment.
The annual differences between annual rent and annual mortgage will shock you. In 2015 the annual difference was between £731 and £973 on mortgages being cheaper.
Can you afford to buy?
When looking to buy you have to consider that it is more costly to buy at the start. You'll need a saving plan to save a deposit and the larger the deposit, the less you'll need to repay. This way you'll be able to apply for lower mortgage rates. You will need to have a target deposit by looking at properties that fit your criteria and working out at least 10% of the value.
When getting a mortgage you will also need to be able to pass affordability checks (a bit like a credit check), they will look at your credit history and spending habits in depth.
Owning a property means you have full responsibility to decorate how you like but also repairs and maintain the property. For example, if your roof leaked or boiler broke there would be no landlord or agent to go to. Overall comparing up front costs, buying has some sizable upfront costs. For example: Solicitor's Fee.
Is renting the only option?
Once you're renting it is more difficult to save up each month for a deposit to buy a house. There is however some hope with Help-to-Buy and other schemes to provide a boost. Unfortunately rising rents will keep being a problem, even for future generations.