Home Ownership is £200,000 cheaper than a lifetime of renting

chucknorris

Graham_Devon wrote: »

Ahh, but is this true?

Say for example interest rates went to 10%. We'd have a large property price fall. It would be difficult to then add 10% to tenants rent. There would be too much choice for them.

If what you said was true, then we would only have low interest rates at times of low inflation. Obviously this isn't the case.

We've had the crash already, although I can see more minor falls in real terms. Interest rates will not go anywhere near 10% at least for the foreseeable future, by significantly higher I was thinking mortgage rates of around 6.5% - 7% (and that wouldn't be for some time).

There will always be exceptions but generally I would say that there is a correlation between interest rates and inflation. I haven't checked but this has always been my perception, feel free to check and see what you find.

wotsthat

Graham_Devon wrote: »

Was the answer to the question supposed to be aspirational then? Bored wotsthat?

Not really. I'm just surprised (not really) at the lengths you'll go to to rubbish any calculations that show buying might be cheaper than renting.

On the one hand you're fretting about our renters not being able to use ISA's to save their deposits and then, on the other, suggesting that their rent will be paid for them in retirement even though they'll have 50 years compounded interest plus initial capital.

Graham_Devon

wotsthat wrote: »

Not really. I'm just surprised (not really) at the lengths you'll go to to rubbish any calculations that show buying might be cheaper than renting.

On the one hand you're fretting about our renters not being able to use ISA's to save their deposits and then, on the other, suggesting that their rent will be paid for them in retirement even though they'll have 50 years compounded interest plus initial capital.

I hardly need to go to any lengths to rubbish this calculation, do I. Although it seems you will go to lengths to have a pop at every opportunity.

wotsthat

Graham_Devon wrote: »

I hardly need to go to any lengths to rubbish this calculation, do I. Although it seems you will go to lengths to have a pop at every opportunity.

When people are considering whether to buy or rent they'll generally try and work out which is best. Cost will be a major factor in working this out.

As far as these calculations go this doesn't seem the worst exercise by a long way and have favoured renters. Yes, it might be nice to assume that our renters (with compulsory deposit saved) were getting a tax free return but this is tinkering around the edges especially when they've used a very low inflation figure.

What would you say was a reasonable set of assumptions to calculate the relative costs of renting vs. buying?

chucknorris

wotsthat wrote: »

When people are considering whether to buy or rent they'll generally try and work out which is best. Cost will be a major factor in working this out.

As far as these calculations go this doesn't seem the worst exercise by a long way and have favoured renters. Yes, it might be nice to assume that our renters (with compulsory deposit saved) were getting a tax free return but this is tinkering around the edges especially when they've used a very low inflation figure.

What would you say was a reasonable set of assumptions to calculate the relative costs of renting vs. buying?

I don't think that it is such a bad exercise either, I think people are getting carried by the 200k headline figure. But that 200k is 50 years in the future, if you discount that back at say 3.5% PA (which I believe is the current treasury discount rate for such calculations) then that 200k becomes about 36k (at today's prices, which people can relate too far more easily than 200k at 2062 prices).

Don't forget that they didn't allow for stamp duty, estate agents/solicitors fees etc. on subsequent moves so it really isn't that unbelievable.

SkyeKnight

paulmapp8306 wrote: »

Housing benefit will be a thing of the past very soon.

As I understand it - universal credit will assess the level of benefits from your income/savings then make a single payment. Whether that payment is used for food, clothes, accomodation (rented OR mortgaged), beer, cigaretts or anything else is completely up to the individual.

I don't think this is right. The level of UC you receive will be based on your income, savings and circumstances. One of the circumstances will be if you live in rented or mortgaged accommodation - those in rented accommodation will qualify for a higher level of UC. There is no way the government can afford to pay Housing Benefit to millions of households who currently own their own homes!!

ukcarper

Graham_Devon wrote: »

Housing benefit.

And if you take that into consideration, the math can work out that the renter pays a lot less.

Yea and they will be living in a 1 bed flat with the threat of having to move at the end of contract. While I will be living in my nice house or living in a 2 bed flat spending the money I made downsizing.

I can see that renting will suite some people especially in the short term but if you are fortunate enough to be able to buy i can't see it being better to rent in the long term.

Graham_Devon

ukcarper wrote: »

Yea and they will be living in a 1 bed flat with the threat of having to move at the end of contract. While I will be living in my nice house or living in a 2 bed flat spending the money I made downsizing.

I can see that renting will suite some people especially in the short term but if you are fortunate enough to be able to buy i can't see it being better to rent in the long term.

I'd prefer to buy than rent, hence why I have dne so (in part I guess!).

However, I was only asnwering the question of what they would do wen they reach pensioner age with no income. HB will take over.

I personally feel buying is much more secure than renting, in more sense than one, and haven't tried to suggest it's cheaper to rent than buy, only looked at the very poor maths used by Barclays to prove the point and sell their products.

I'm surprised absolutely no one has picked up on using your parents income to be honest, as it seems like quite a bold move to me!

chucknorris

Graham_Devon wrote: »

I'd prefer to buy than rent, hence why I have dne so (in part I guess!).

Whilst the money side of things is obviously important I really believe that the individual's preferred lifestyle choice is even more important. There may be well some people who prefer renting either temporarily or permanently and good luck to them, however for me this is definitely not the case.

MacMickster

Lifestyle choice should really be the only choice.

Nobody really knows how house prices, interest rates, rental legislation and a host of other variables are going to vary over a lifetime, so to try to base the decision on a financial calculation over a lifetime would be laughable.