Buying Cheaper Than Renting Everywhere except London

HAMISH_MCTAVISH

First-time buyers in all areas of the country outside London could save an average of £52 a month by becoming owner-occupiers rather than renters, according to high street bank Abbey.

The group said house price falls had knocked 9% off the cost of a typical first-time buyer property - such as a flat or terraced house - outside London during the past 12 months to leave them averaging £92,861.
It estimates that someone buying one of these properties with a 25% deposit would have average monthly mortgage payments of £382, based on a rate of 4.39%.

But renting a comparable property costs an average of £434 a month, meaning those who opt to buy would be around £624 a year better off.
However, first-time buyers in the capital would have to find a property costing less than £158,000 in order for their monthly mortgage repayments to be cheaper than average rents for comparable properties of £650 a month.

Potential buyers in Wales could make the biggest savings by buying rather than renting, at an average of just over £90 a month, followed by those in the North West at £87.

But the difference is smallest in East Anglia, where a first-time buyer would be only £2.59 a month better off compared to if they were renting.

http://uk.news.yahoo.com/21/20091009/tuk-most-renters-better-off-buying-home-6323e80.html

So much for the "I'm saving the difference" myth......

Edited to add link.

the_ash_and_the_oak

Thats pretty interesting I have to admit. Do you know if it includes the opportunity cost of the loss of interest on the 25% deposit? (and the buy and sell costs if its an FTB flat rather than a long-term home?)

the_ash_and_the_oak

Would certainly be interesting to see comparable figures for those with 0%, 10% and 40% deposits as well imo

CLAPTON

the_ash_and_the_oak wrote: »

Thats pretty interesting I have to admit. Do you know if it includes the opportunity cost of the loss of interest on the 25% deposit? (and the buy and sell costs if its an FTB flat rather than a long-term home?)

yes

they are comparing mortgage costs of buying 75% of a property with the full rent

but interesting nevertheless

carolt

What a load of rubbish. How many FTB's are going to get long-term fixes for 4.39%?

Oh, yes, precisely NONE.

And what idiot would buy on a short term rate now, when inteest rates are going to shoot up within a year or two?

Ignoring the fact that the article is wong even now - I don't live in London, and it's certainly FAR MORE EXPENSIVE to buy than to rent at current prices/rates, even for those few for whom it does apply, the chances of it continuing to apply over the 25 year life of the mortgage are non-existent - if they buy at current prices.

Far better to wait - unless you can get a long-term fix at those rates (you can't) - as once rates rise, prices, will, inevitably fall.

But then what would you expect from research from Abbey, a mortgage lender?

It's in their interests to distort the information to get more suckers to increase their profits. They don't care if FTB's suffer in the long rn - after all, they're protected by the 25% deposit, if they need to repossess.

Caveat emptor.

HAMISH_MCTAVISH

CLAPTON wrote: »

yes

they are comparing mortgage costs of buying 75% of a property with the full rent

but interesting nevertheless

They are comparing a 75% LTV full repayment mortgage at 4.39% with the costs of rent.

They claim the average FTB property outside of London is around 93K, which would require a 23K deposit for a 75% LTV.

If you left that same 23K in the bank at 3% interest, it would give you a return of £690 a year, or £57 a month.

If you applied that amount to your rent, you would be £6 a month cheaper renting than buying for now, but would still be adding the full monthly costs to your lifetime housing expense as it's another month you could be living rent/mortgage free at the other end of the mortgage.

To further put that £690 a year interest on the deposit in perspective, it doesn't even cover the average price increase in that 93K house last month alone, let alone since February.

carolt

HAMISH_MCTAVISH wrote: »

They are comparing a 75% LTV full repayment mortgage at 4.39% with the costs of rent.

They claim the average FTB property outside of London is around 93K, which would require a 23K deposit for a 75% LTV.

If you left that same 23K in the bank at 3% interest, it would give you a return of £690 a year, or £57 a month.

If you applied that amount to your rent, you would be £6 a month cheaper renting than buying for now, but would still be adding the full monthly costs to your lifetime housing expense as it's another month you could be living rent/mortgage free at the other end of the mortgage.

Thanks undeserved and unintentional.

What a load of cobblers.

Do even you, Hamish, really, truly, in your heart believe that a rate of 4.39% is going to be the average you're going to pay over the life of the mortgage?

And do you really, truly, in your heart, believe that interest rates on savings are not going to rise above 3% over that 25 year period either?

What a load of utter tosh. :rolleyes:

tek-monkey

Did they factor in insurance and maintenance costs not applicable when renting?

abaxas

What a load of tosh.

Anyone who pays the asking rent for a property is stupid. Also rents for larger better properties are much cheaper per m2 and hence much cheaper relative to mortgages.

I'd agree that in the case of a <100k property rent>buying. However when you get up the scale, it simply isn't the case. Do you sersiouly think you can get a 1000pm mortgage on a place 'worth' 1/2 million? If you can, well done.

HAMISH_MCTAVISH

carolt wrote: »

And what idiot would buy on a short term rate now, when inteest rates are going to shoot up within a year or two?

Interst rates are not going to "shoot up" any time inside of a decade or longer. Any rate rises will be tiny, and not happen for years.

Besides, even if they did "shoot up", they'd still not come anywhere close to covering the extra £14,000 you already have to find since February....

Ignoring the fact that the article is wong even now - I don't live in London, and it's certainly FAR MORE EXPENSIVE to buy than to rent at current prices/rates, even for those few for whom it does apply,

The article is not wrong now. It is based on averages.... There will be a few pwople for whom it does not apply, but for the majority it does.

the chances of it continuing to apply over the 25 year life of the mortgage are non-existent - if they buy at current prices.

Carol, it is almost impossible to find a scenario where buying is not cheaper than renting over any given 25 year period.

Check any buy versus rent calculator. The gains through buying are staggering.

Far better to wait - unless you can get a long-term fix at those rates (you can't) - as once rates rise, prices, will, inevitably fall.

I can show you many times in history where increases in interest rates have been accompanied by increases in house prices.

There is no evidence to prove that price falls are inevitable when rates rise.

HAMISH_MCTAVISH

carolt wrote: »

Thanks undeserved and unintentional.

What a load of cobblers.

Do even you, Hamish, really, truly, in your heart believe that a rate of 4.39% is going to be the average you're going to pay over the life of the mortgage?

And do you really, truly, in your heart, believe that interest rates on savings are not going to rise above 3% over that 25 year period either?

What a load of utter tosh. :rolleyes:

Carol, what you clearly fail to realise is that even at peak prices, and even with interest rates at 6%, buying is cheaper than renting over 25 years.;)