Buying Cheaper Than Renting in 75% of UK

IveSeenTheLight

Procrastinator333 wrote: »

Most (as shown everytime I raise this point) are not aware of the fact thy if prices are flat and rent = mortghe interest, it makes no difference.

How many times does rent = mortgage interest?

Certainly it appears in my VI area that rent is still more expensive than capital and interest.

IveSeenTheLight

Out,_Vile_Jelly wrote: »

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

Certainly there are areas in the UK where it is extremely expensive to buy.

To tar all areas where it is cheaper to buy than rent as dumps is quite narrow minded.

Maybe you need to look at alternative areas to expand your thought basis.

Procrastinator333

IveSeenTheLight wrote: »

How many times does rent = mortgage interest?

Certainly it appears in my VI area that rent is still more expensive than capital and interest.

This is not an absolute and is open for debate. My personal experience was comparing a house that was up for sale for £290k and a rent of £1,100. Renting is cheaper for me.

Procrastinator333

My whole point is not to be either bullish or bearish, for it can end up pointing in either direction. 2 very different examples:


Person A has come in to a windfall of £120k. They could afford an £80k mortgage easily, so look at properties for £200k.

Their finances allow for interest rate shocks and so they would be looking at rates of 3% or less.

Assume the rental %'s for their area are 6%. If house prices are flat, are they better off buying or renting?

If they buy on interest only. In year 1 they spend £2.4k on interest and still have a house with equity of £120k.

If they rent, say they manage an interest rate of 3% after tax on their savings. So they get an income of £3.6k.

The rent costs them £12k. So net cost for renting is £8.4k.

So at the end of year 1, for the same cost as renting, they could have put another £4.8k of equity in to the house.

So in this scenario, their break even point is house prices falling by 2.4%. E.g. if prices fall by 2.4% they have neither lost nor gained by buying or renting.



Person B has just scrapped together a 10% deposit on a £200k house. Still 6% rent. But as they are a ftb with low LTV and can't take interest rate hikes, they are looking at a fix of 6%

If they buy, at the end of year 1 they have an interest bill of £190k X 6% or £11.4k.

If they rent they get a return of £300 and a rental cost of £12k, leaving a total cost for the year of £11.7k.

So for person B to break even, prices need to fall by 0.15%.



While I disagree with the Zoopla numbers, I do agree that there is likely a wide spread across the country.

So in some parts, people may plug numbers in to the above and find they actually need prices to fall 6 or 7% just to break even, or in other parts they may find they need prices to rise 6 or 7% just to break even.

Such variances present very different start points for the buying decision.

This combined with the idiotic idea that rent is in of itself wasted while interest is an investment is the point I try to make.

HAMISH_MCTAVISH

Graham_Devon wrote: »

There was actually some proper research done on renting vs buying.

Worked out that the break even point was 42 years (could have been 40, or 44, though think it was 42).

So basically you could rent for 42 years and break even with the homeowner. It was only after that point that the homeowner would start gaining on you and the renter would start falling backwards.

Was based on the figures when the research was actually done, but included stuff like legal fee's, insurance, repairs, maintanance. Basically all the stuff a mortgaged homeowner would have to pay for, that the renter would not have to pay for. It also included an average amount of moves, think it was 4 moves in total that they used, as every move will cost the mortgaged person a hell of a lot of money. Cost 10k to move? Well thats over a years rentals for the renter for example.

Not going to go hunting the research down, I'm sure we all know and accept that those buying do have extra costs, moving being the biggest one, and it's not good just comparing rent to a mortgage payment.

Utter bollox....

Homeowner is ahead after just 5 years in most cases, and well into 6 figures on a decent house by the end of a mortgage. Even with conservative HPI, decent interest on a deposit equivalent, and below inflation rent increases.

http://www.timesonline.co.uk/tol/money/calculators/article5771800.ece

As for the 10K to move house scenario, I've moved between continents for less than 10K several times. So if they think it costs that much to move across town they're full of !!!!!!.

vaporate

arby wrote: »

finally, you admit that renting is better for 1 in 4 people!

i know i'm definitely one of those people. the real challenge is to try and get other people to even consider they might fall into that category. So many people just blindly follow the mantra that renting is dead-money. Muppets. (not people that buy, but people that do it without even considering their options before blowing £200k+)

blowing banks money not theirs.

chucky

Chaos_A.D. wrote: »

This thread should have ended here, short, concise and bang on the money. I know what chucky said in his post after, but that's irrelevant. If IR's were their historical average, mortgage rates would be around 6.5-8% at least and more if your credit is bad. That would be enough to tip the property market into the abyss.

The average variable rate I believe is around 4.75% at this time.

how can it be irrelevant when mortgage rates are not 0.5%... except for those on trackers.. you said it yourself that the average SVR is 4.75%

all the 0.5% comment is a soundbite that has no relevance to mortgage rates

Exocet

chucky wrote: »

all the 0.5% comment is a soundbite that has no relevance to mortgage rates

Er, it makes a lot of difference to mine.

chucky

Exocet wrote: »

Er, it makes a lot of difference to mine.

me too but you and me are different

Graham_Devon

chucky wrote: »

all the 0.5% comment is a soundbite that has no relevance to mortgage rates

Why do you keep saying this over and over in response to various posters?

We all know you are working on a mere technicality.