Cheaper to Buy than Rent in Wales

stevetodd

chucky wrote: »

sorry not my research - speak to Sky
but you should really read the whole article...

"London and East Anglia are the only regions where renting is still less expensive than buying for people with a 25% deposit"

I don't think 25% is a big deposit - to me that should be the average deposit anyway.

I don't think you would have the best choice of mortgages with less than 25% too

LittleMissAspie

I know it's not your research, I left the quote marks in. And I did read the whole article and I agree that people should have a 20-25% deposit as standard.

It just seems completely obvious to say that the more deposit you have, the smaller your mortgage will be, which makes it more likely to be cheaper than renting.

Dithering_Dad

stevetodd wrote: »

I don't think it's cheaper to buy than renting for another 12 months and paying at least 10% less for the property though, I bet they haven't factored that in.

I thought so too, and so did some rudamentary calcs:

Imagine you had £10k saved up and bought a house for £110k, with a 5% mortgage. An interest only mortgage would set you back £416.67 (£5000 pa). You used to rent an equivalent house for £500pm (£6000 pa). You're now £1000pa up by owning your own home. You therefore overpay this £1000 onto your mortgage, reducing it to £99000.

Year2...

Your mortgage payments are now £412.50 pm (£4950 pa).
Or.. You buy an equivalent property for 10% cheaper due to HPC, i.e. for £99000, and so with your £10k deposit you pay £89000. Your 5% mortgage on an £89000 house would be £370.83pm (£4450pa).

Basically for waiting another year, you would save £500 per year on your mortgage payments, for the lifetime of your mortgage.*

Looks like it's still better to wait for that 10% fall in 2009, even if you're paying more in rent.

I guess where the logic goes wrong is if you're sick and tired of renting and want your own home. As the average time people stay in a house is 7 years, you could argue that you're paying an extra £2500 over that average 7 year period, than if you stayed in rented accomodation for an extra year. It's upto the individual whether £2500 in the pocket is more important than an extra year of home ownership.

* I'd advise everyone to do these sorts of calculations on a periodic basis because eventually the calculations will tell you that it's time to buy!

stephen163

I'm sorry, but Mr Filice, the estate agent from Cardiff, sounds like an idiot. The old 'rent is dead money' argument. I'll make a deal with you Mr Filice, you pay the interest charges on my 85% mortgage for the next 25 years (even when interest rates rise to 5% in a few years) and i'll buy a house off you.

Thrugelmir

stephen163 wrote: »

I'm sorry, but Mr Filice, the estate agent from Cardiff, sounds like an idiot. The old 'rent is dead money' argument. I'll make a deal with you Mr Filice, you pay the interest charges on my 85% mortgage for the next 25 years (even when interest rates rise to 5% in a few years) and i'll buy a house off you.

Why?

When you've you repaid your mortgage, you'll no longer have any committment to pay rent. In itself a considerable saving. Perhaps enabling you to redirect this into a tax efficent savings plan such as a pension.

Rents will ultimately rise over a period of time.

The rent is dead money is probably more relevant in the near future than for a long time. As a combination of low interest rates and low property prices will make buying a house a good investment.

By investment I mean for individuals as a home not as a speculative punt.

stevetodd

Dithering_Dad wrote: »

I thought so too, and so did some rudamentary calcs:

Imagine you had £10k saved up and bought a house for £110k, with a 5% mortgage. An interest only mortgage would set you back £416.67 (£5000 pa). You used to rent an equivalent house for £500pm (£6000 pa). You're now £1000pa up by owning your own home. You therefore overpay this £1000 onto your mortgage, reducing it to £99000.

Year2...

Your mortgage payments are now £412.50 pm (£4950 pa).
Or.. You buy an equivalent property for 10% cheaper due to HPC, i.e. for £99000, and so with your £10k deposit you pay £89000. Your 5% mortgage on an £89000 house would be £370.83pm (£4450pa).

Basically for waiting another year, you would save £500 per year on your mortgage payments, for the lifetime of your mortgage.*

Looks like it's still better to wait for that 10% fall in 2009, even if you're paying more in rent.

I guess where the logic goes wrong is if you're sick and tired of renting and want your own home. As the average time people stay in a house is 7 years, you could argue that you're paying an extra £2500 over that average 7 year period, than if you stayed in rented accomodation for an extra year. It's upto the individual whether £2500 in the pocket is more important than an extra year of home ownership.

* I'd advise everyone to do these sorts of calculations on a periodic basis because eventually the calculations will tell you that it's time to buy!

Yes I agree, for personal reasons I would never STR but I could understand those that did and obviously if you are waiting to buy, it's better just to sit tight for another year if you are not inconvenienced

Pobby

This might give you an idea of what is happening in Wales right now. Have a look at what has been going on at auction.
http://www.rhseel.co.uk/auctions.html

IveSeenTheLight

Dithering_Dad wrote: »

Looks like it's still better to wait for that 10% fall in 2009, even if you're paying more in rent.

I guess then its a gamble if your going to see those percentage drops on your specific type of property and the specific area you are looking at.
Not everywhere is the same.

stephen163

Thrugelmir wrote: »

Why?

When you've you repaid your mortgage, you'll no longer have any committment to pay rent. In itself a considerable saving. Perhaps enabling you to redirect this into a tax efficent savings plan such as a pension.

Rents will ultimately rise over a period of time.

The rent is dead money is probably more relevant in the near future than for a long time. As a combination of low interest rates and low property prices will make buying a house a good investment.

By investment I mean for individuals as a home not as a speculative punt.

If house prices are falling or static (at the moment they are falling) and, as is happening in most parts of Britain, rents are falling, then it is silly to call rent 'dead money'.

Rents rise, wages rise. It's all relative.

You can bet your life that interest rates will shoot up and over your 25 year mortgage, they will average out to around 4%. Near zero rates are rare and short lived. A lot of people don't realise you end up paying around double your mortgage by time you've repaid. Wouldn't it be better to rent now and pocket the savings you make? Save £5k in a year and you'll pay £15k less in mortgage payments over the 25 years.

If someone is £15k better off over a specified time period because they rent, that is £45k less in mortgage payments (15k less to pay in the first place plus 15k less mortgage plus the 15k charge to service the loan).

That's what angered me about the estate agents comments.

IveSeenTheLight

stephen163 wrote: »

If house prices are falling or static (at the moment they are falling) and, as is happening in most parts of Britain, rents are falling, then it is silly to call rent 'dead money'.

Rents rise, wages rise. It's all relative.

You can bet your life that interest rates will shoot up and over your 25 year mortgage, they will average out to around 4%. Near zero rates are rare and short lived. A lot of people don't realise you end up paying around double your mortgage by time you've repaid. Wouldn't it be better to rent now and pocket the savings you make? Save £5k in a year and you'll pay £15k less in mortgage payments over the 25 years.

If someone is £15k better off over a specified time period because they rent, that is £45k less in mortgage payments (15k less to pay in the first place plus 15k less mortgage plus the 15k charge to service the loan).

That's what angered me about the estate agents comments.

You are correct in what you are saying, however, if you can save £5k in a year, there is nothing to stop a homeowner putting that saving into a mortgage and also saving on the compounded interest.

This is what I've been doing for a number of years and throughly recommended on the mortgagre free board.

The only true comparison between renting and buying in terms of costs each month is to compare the rent versus the mortgage interest.

Of course if in your area and if your type of property is falling in value, then it could be a contributer to remain renting, depending on how much it is dropping by and the rent to mortgage interest ratio.

Similarly, when house prices rise, it will be a factor as each month the inital required mortgage loan would be getting higher and higher.

Savings while renting and referenced against being able to put down a larger deposit should be factored as an option to overpay into the mortgage.
Only if the rent is less than the mortgage interest should that extra savings be considered.