Cheaper to buy than to rent

breadlinebetty

Most people know it's cheaper to buy than to rent, as reported today in the Daily Mail:

http://www.dailymail.co.uk/news/article-2203559/Why-cheaper-buy-rent-Difference-132-month-bed-house.html

Just wondering how people are managing to save for a deposit while paying rent?:cool:

00ec25

the same way they always did, they live within their means, so: spend much less than they earn, don't take out credit and do without things others "must" have

dimbo61

The number of mortgages given out to people with less than 15% deposit have again dropped because of tighter lending policy by lenders
Now less than 1 in 10 of new mortgages
So you need to save up a HUGE amount of money to buy a property depending on where you live.
Many people in there current property cant afford to move UP due to the amount of equity they have in there existing property

InMyDreams

This report also assumes a 27% deposit at the start if you're buying. So to compare like-with-like, surely you have to also take into consideration the income that such a huge lump sum could generate if it wasn't put down as a deposit on a house. To put that another way, why not assume 100% deposit? Then buying a house would work out as almost free, surely, as there would be no mortgage repayments at all.

I think the only fair way to compare the *true* costs is to assume no deposit but then only count the interest paid on the mortgage. (Any capital repayment is equivalent to saving cash, which both renters and owners can do.) I would be much more interested in those figures.

Edited to add: so it should be no surprise that during a time of ridiculously low interest rates, buying seems cheap in comparison. If we could guarantee today's rates for 25 years, then of course buying is the obvious answer. But therein lies the problem...

mrginge

I heard that some young people who wanted to get on the housing ladder were having to resort to measures such as - cancelling sky, not having an ipad, stopping smoking. Surely this is a breach of their human rights.

Wickedkitten

InMyDreams wrote: »

Edited to add: so it should be no surprise that during a time of ridiculously low interest rates, buying seems cheap in comparison. If we could guarantee today's rates for 25 years, then of course buying is the obvious answer. But therein lies the problem...

They do put that bit in the article

The report from Halifax, published today, looked at a three-bedroom house, which currently costs £157,400 on average.

For the homeowner, the average monthly mortgage payment, including other ‘buying’ costs, is £600. For the tenant, the monthly rent bill is £732.

because

homeowners are benefiting from cheap mortgage deals following the Bank of England’s decision to cut interest rates to an historic low in March 2009

Callie22

mrginge wrote: »

I heard that some young people who wanted to get on the housing ladder were having to resort to measures such as - cancelling sky, not having an ipad, stopping smoking. Surely this is a breach of their human rights.

I'm really, really sick of this tired old argument that's trotted out every time there's a debate on house prices. How stupid of me, I never realised that the main reason my partner and I can't afford a house is because we have Sky (which we don't - we don't even have a TV), because we smoke and drink (although actually OH and I do neither) and because our house is full of new technology (nope, looking round can't see any of that either - I can see a £17.99 PAYG mobile phone and a laptop from 2004, but if someone could tell me where I've hidden my ipad, iphone etc etc then I'd be ever so grateful ...) and because we spend all of our money going out (so I'm not sure what I was doing last night cooking a meal from scratch so it fits within my food budget, and then doing the ironing ...)

However, if it makes people feel all smug and superior to spout the standard, pointless argument then they can go for it. God forbid anyone accepts that it is virtually impossible for ordinary,working people to save the huge deposits needed to buy when you're renting - rents are too high, and then any savings you do manage to achieve get swallowed up every time you end up having to move. Maybe I'll buy myself an iPhone (ooo, I'll do it on credit too!!) just to make other people feel like they're right ...

Zero_Sum

breadlinebetty wrote: »

Most people know it's cheaper to buy than to rent, as reported today in the Daily Mail:

http://www.dailymail.co.uk/news/article-2203559/Why-cheaper-buy-rent-Difference-132-month-bed-house.html

Just wondering how people are managing to save for a deposit while paying rent?:cool:

except its not an either or is it?
I'd say most people would save for a deposit whilst they still live with their parents. I did & everyone I know did.

Callie22

Zero_Sum wrote: »

except its not an either or is it?
I'd say most people would save for a deposit whilst they still live with their parents. I did & everyone I know did.

Many people I know don't have that option. I certainly didn't - the family house isn't big enough and my parents live in a very rural area with very little employment. Most of what there is tends to be minimum wage and seasonal, so not ideal for saving. Add to that, they certainly couldn't have afforded for me to live there for 'free' (or a minimal rent) whilst I saved. It's not really a feasible solution for many people.

LiGhTfasT

Work your !!! off while still living with parents and save, save, save. I saved over £30,000 while working at sodding ASDA. Now i pay half of what the other people are paying to rent around here and best of all i get the house at the end of it.

Most of my mates did the same, the other ones who blew money on throw away junk are renting and skint. Plan your life, start saving as soon you work and the worlds a lot cheaper.

HAMISH_MCTAVISH

InMyDreams wrote: »

I think the only fair way to compare the *true* costs is to assume no deposit but then only count the interest paid on the mortgage. (Any capital repayment is equivalent to saving cash, which both renters and owners can do.) I would be much more interested in those figures.

Average rental yield is currently around 5.5%.

Average mortgage interest is currently around 3.4%.

Edited to add: so it should be no surprise that during a time of ridiculously low interest rates, buying seems cheap in comparison. If we could guarantee today's rates for 25 years, then of course buying is the obvious answer. But therein lies the problem...

Actually, you can guarantee today's rates for 25 years.

http://www.thisismoney.co.uk/money/mortgageshome/article-2191621/Are-brave-The-25-year-fixed-mortgage-returns.html

A 25 year fixed rate mortgage is available at 5.24%.

Only marginally less than the cost of rent today, but of course rent will increase with inflation and the mortgage won't.....