Is renting the new buying?
By Laura Sears
The UK is a nation of homeowners, the aspiration of which is viewed by many as a major life goal, the product of a lot of hard work and saving.
However, new research from agents Hamptons has revealed that it’s cheaper to rent a home than it is to buy one, with the average tenant paying £1,054 a month compared to the £1,125 repayment made by an average first-time buyer with a 10% deposit.
As a result of the pandemic, house price growth and higher loan-to-value mortgage rates have pushed up costs for buyers, while rental prices fell, reversing a six-year trend. Larger properties have also been in higher demand, with COVID seeing many people re-evaluate their lifestyles and prioritise outdoor space (which they are doubtless all smug about during last week’s sunny weather) as well as room for home working. As a result, a mass exodus from London ensued last year as many renters left the capital, taking rental values with them.
However, this trend is already starting to reverse. I have friends who made the move to the countryside in search of the rural idyl, but now the office beckons and that city lifestyle is beginning to return, people are realising the consequences of their rash decisions and beginning to trickle back.
Add this to falling mortgage rates, which are continuing to reduce as lenders compete for business, with a number of <1% deals now available, buoyed by economic recovery in line with the Stamp Duty holiday and general market confidence, and signs seem to point to an eventual reversal in this trend, with monthly affordability soon to swing back the other way, despite house price growth levels continuing.
As someone who dreams of being a homeowner, the financial benefits of owning a property certainly outweigh those of renting, but less so in other aspects such as lifestyle.
My partner and I currently rent a lovely two-bedroom flat in south west London – something we’d never be able to afford to buy – and at this stage of our lives the proximity to work and the amenities nearby matter far more to us than the financial stability of owning.
However, knowing that we both desire to own our own home, it’s frustrating that the monthly rental payment on said flat would comparatively afford us a nice house a bit further out of the capital in mortgage payments: if only we could afford that pesky deposit.