Buying Cheaper Than Renting in 75% of UK

the_flying_pig

these numbers look kind of dubious to me.

"mortgage payments on a two-bedroom property averaging £368 a month", well, other than temporary 'teaser' rates 4% would be an unrealistically low assumed mortgage rate, no doubt about it...

http://www.mortgagesorter.co.uk/best_buy_first_time.html

and for a 4% interest only mortgage to give you monthly repayments of £386, the mortgage would have to be no more than £110k... plausible i suppose but for renting to be cheaper... since when were gross rental yields of 6% widespread?

the thing that looks the fishiest though is the way that [say] the huddersfield numbers are so different to the derby ones... are those places really so different fundamentally? or is it more likely that the differences are due to some kind of measurement error?

chucky

the_flying_pig wrote: »

these numbers look kind of dubious to me.

it's never really going to be comparable though.

what's an average LTV?
what's the average mortgage rate?
what's the average rent?
what's the average size property?

there are too many variables to make it comparible or even claiming one is better than the other.

long term and probably medium term buying will be better than renting.
short term is debatable IMO.

Idiophreak

Procrastinator333 wrote: »

Gibberish.

If rent % = mortage interest rate it makes no difference.

That may be true in theory, but not in practice. In practice, people will take a (say) 25 year mortgage and they'll pay it off over roughly that term. They may overpay at the end, they may remortgage along the way, who knows. The point is, in the "real world", the sooner you start paying the thing back, the sooner you'll finish it. There may be some who can work the numbers (or "gamble" as it's known) in such a way that renting for a year effectively shortens their mortgage, but this is an extremely small minority of people.

Out,_Vile_Jelly

The places where it's cheaper to buy are no doubt dumps where I'd never want to live.

the_flying_pig

chucky wrote: »

...long term and probably medium term buying will be better than renting.
short term is debatable IMO.

maybe.

the key advantage of buying is that it protects you from inflation - your interest and capital payments will always be based on the value of your house on the day you bought it rather than what it is today. interest rates and rental yields change a lot - history shows that either one of the two can stay higher for a long period.

someone who bought in summer '89 would, looking back on his purchase ten years later, most likely [i think - i'm not sure about average rental yields towards the end of the 90s] reflect that he'd have beem better off renting during that period.

and, of course, buying in summer '99 was with hindsight vastly better than renting than renting for the decade that followed.

there certainly hasn't been a 20- or even 15-year period in modern history over which renting has been better, basically because we've not gone that long without at least one period of high inflation.

paul1964_2

HAMISH_MCTAVISH wrote: »

.

Monthly mortgage interest payments on a two-bedroom property are typically 8% lower than the cost of renting a comparable home, according to property website Zoopla.co.uk.

Zoopla you say?

Just checked the property I am renting on Zoopla.

It reckons the house is worth £346k and gives a range of £310k to £383k. Personally, I would estimate the property value at the lower end of the range, but theirs is a reasonable guess.

It also reckons the house would rent for £1298 pcm, within a range of £1177 - £1422. The little graphic gives a pretty high level of confidence for this estimate.

I pay £800pcm.

On Rightmove, there is nothing to rent in my area at £1298-ish, but for £1000 pcm, I could get a much bigger house in a very desirable location.

I have no idea how they work out rental values, but from what I can see, Zoopla's confidence in the accuracy of their data is misplaced.

Procrastinator333

DaddyBear wrote: »

Not if you have a repayment mortgage. After 25 years you'll have no mortgage to pay, if you rent you'll pay rent forever.

Still true, because the comparison is then say £500 int expense + £200 repayment vs £500 rent + £200 saving for deposit.

If prices are flat you end up with the exact same equity in the house.

No difference, well in the short term. Once the deposit builds up you should also factor in interest saved vs int earned (which is taxed). But for a ftb thy is marginal.

the_flying_pig

Procrastinator333 wrote: »

Still true, because the comparison is then say £500 int expense + £200 repayment vs £500 rent + £200 saving for deposit...

agreed, but i don't particularly rate your chances of getting a wider understanding of that point, especially with the likes of Hamish partly deliberately obfuscating, confusing, & conflating...

Procrastinator333 wrote: »

...If prices are flat you end up with the exact same equity in the house...

in the long run, though, house prices prices do go up in line with wage inflation, that's the key advantage of buying... you don't, of course, get very much of this benefit if you pay a purchase price that fully takes into account not only this advantage but a whole host of [largely imagined] other advantages into account as well...

Procrastinator333

Idiophreak wrote: »

That may be true in theory, but not in practice. In practice, people will take a (say) 25 year mortgage and they'll pay it off over roughly that term. They may overpay at the end, they may remortgage along the way, who knows. The point is, in the "real world", the sooner you start paying the thing back, the sooner you'll finish it. There may be some who can work the numbers (or "gamble" as it's known) in such a way that renting for a year effectively shortens their mortgage, but this is an extremely small minority of people.

Agreed many can't grasp this point. But it doesn't make it any less true. And as long as people are saying renting is wasted money I will keep making this point.

I'm not advocating gambling. How is making an informed decision gambling?

If rent is less than mortgage interest rates you will pay it of sooner by delaying the purchase (assuming flat priced).

A lot of people don't understand this, but it doesn't make it any less true.

Procrastinator333

the_flying_pig wrote: »

in the long run, though, house prices prices do go up in line with wage inflation, that's the key advantage of buying... you don't, of course, get very much of this benefit if you pay a purchase price that fully takes into account not only this advantage but a whole host of [largely imagined] other advantages into account as well...

I have never said it is better long term. But it can make a large difference short term. And the main point of this comment is to argue aginst the ignoarant idea that rent itself is somehow a waste compared to a mortgage. Not always true.