Cheaper to buy than to rent

brit1234

I think it is very misleading to compare mortgage payments to renting especially when it assumes you are paying on interest only with a big deposit. We also know mortgage rates continue to rise and house prices are falling. Renting gives you flexibility without the equity loss and it is still easy to rent cheaply in good locations if you look hard enough.

I'm renting happily and still saving substantial sum for house deposit.

InMyDreams

breadlinebetty wrote: »

I don't know which part of the planet you reside, but in the UK rents are far more expensive than mortgages. Surely you know that interest rates are at an all time LOW - hence the low repayments!!

So how is a mortgage inflated when interest rates are soooo low??? Hello??? On top of that, people can take out a fixed rate mortgage (which we've gone through before.....) so while rents will continue to rise, rise and rise - your mortgage repayments will stay the same.:money:

Now I'm really confused. Do you want to fix or not? The 'inflated' rate is the premium for fixing for 25 years.

Lets take the average three-bedroom house, which currently costs £157,400 according to the link posted in this thread. You are right, I'm not totally up on what rents are, but that report says this would cost £732 to rent. I challenge you to find me a fixed rate mortgage that would cost less, and I'll even let you ignore any arrangement fees, other associated buying costs, deposit requirements and pretend you can borrow the full £157,400.

breadlinebetty wrote: »

Your suggestion about people finding somewhere cheap to live......there aren't many cheap places around. And those that are cheap are dumps! And if they were to pay rent for a slum (more than a mortgage would cost them!) the little they had left over to put in a savings account wouldn't help them much...because interest rates are soooo low!!!!!:money:

I'm just suggesting renting somewhere cheaper than what they would buy... not that they should live in a dump! (Unless a slightly better dump was all they were aspiring to buy.) And if they would have so little left over after the rent, the only way to make a mortgage cheaper (even if you *could* get one for 100%) would be to take a very short term deal and then what would they do when they get to the end of their deal and/or interest rates rise?

I just don't believe that you can fix your interest rate for 25 years for less than rent would cost. But happy to be proven wrong.

I think the article is biased because the so called £600 per month they say a mortgage would cost, is based on an interest rate of 3.82% and a hefty deposit.

buglawton

I think that inside the M25 renting is way cheaper than buying. Was looking at some houses near Paddington for instance, a modest flat for say half a million, similar rentable ones for under £2k per month.

Most countries in the world put some brakes on foreign money holding local property, not so the UK!

So London property is bought not for serious interest cash return, but like gold, to hold as a hedge against other assets. And like gold, the prices seem irrational against the actual use. Maybe this has spread to the tourist locations and posh other city locations too.

breadlinebetty

brit1234 wrote: »

I think it is very misleading to compare mortgage payments to renting especially when it assumes you are paying on interest only with a big deposit. We also know mortgage rates continue to rise and house prices are falling. Renting gives you flexibility without the equity loss and it is still easy to rent cheaply in good locations if you look hard enough.

I'm renting happily and still saving substantial sum for house deposit.

No-one mentioned taking out an interest-only mortgage??:cool: You can take out a repayment mortgage, whereby you also pay past of the capital off each month too!:)

It doesn't seem to be sinking in that people can take out a FIXED RATE mortgage! Which means, BRIT, that your repayments remain the same regardless of interest rates increasing!!!

House prices are not falling in London, so you're going to have a long long wait if that's what you're hoping. Indeed, it's forecast that house prices will be rising next year everywhere else too.

breadlinebetty

buglawton wrote: »

I think that inside the M25 renting is way cheaper than buying. Was looking at some houses near Paddington for instance, a modest flat for say half a million, similar rentable ones for under £2k per month.

Most countries in the world put some brakes on foreign money holding local property, not so the UK!

So London property is bought not for serious interest cash return, but like gold, to hold as a hedge against other assets. And like gold, the prices seem irrational against the actual use. Maybe this has spread to the tourist locations and posh other city locations too.

London prices are totally separate to the rest of the country, which could be why there's often confusion on this board! London is expensive and always will be in comparison to the rest of the UK.

Idiophreak

breadlinebetty wrote: »

No-one mentioned taking out an interest-only mortgage??:cool: You can take out a repayment mortgage, whereby you also pay past of the capital off each month too!:)

It doesn't seem to be sinking in that people can take out a FIXED RATE mortgage! Which means, BRIT, that your repayments remain the same regardless of interest rates increasing!!!

House prices are not falling in London, so you're going to have a long long wait if that's what you're hoping. Indeed, it's forecast that house prices will be rising next year everywhere else too.

Just ignore Brit's contribution on house price threads...He's openly got an interest in trying to discourage buying and his desperation to do so clouds his judgement at times

breadlinebetty

InMyDreams wrote: »

Now I'm really confused. Do you want to fix or not? The 'inflated' rate is the premium for fixing for 25 years.

Lets take the average three-bedroom house, which currently costs £157,400 according to the link posted in this thread. You are right, I'm not totally up on what rents are, but that report says this would cost £732 to rent. I challenge you to find me a fixed rate mortgage that would cost less, and I'll even let you ignore any arrangement fees, other associated buying costs, deposit requirements and pretend you can borrow the full £157,400.




I'm just suggesting renting somewhere cheaper than what they would buy... not that they should live in a dump! (Unless a slightly better dump was all they were aspiring to buy.) And if they would have so little left over after the rent, the only way to make a mortgage cheaper (even if you *could* get one for 100%) would be to take a very short term deal and then what would they do when they get to the end of their deal and/or interest rates rise?

I just don't believe that you can fix your interest rate for 25 years for less than rent would cost. But happy to be proven wrong.

I think the article is biased because the so called £600 per month they say a mortgage would cost, is based on an interest rate of 3.82% and a hefty deposit.

You seem to be forgetting that rents INCREASE all the time - whilst fixed rate mortgages DO NOT. Therefore, taking inflation into account in just 10 years from now your mortgage repayments will be LESS than your rent. It's very simple mathematics.........

And in 25 years from now your mortgage repayments will be peanuts compared to your rent. And the best part of all - you'll end up OWNING your property - you won't have bought it for your landlord!

InMyDreams

breadlinebetty wrote: »

You seem to be forgetting that rents INCREASE all the time - whilst fixed rate mortgages DO NOT. Therefore, taking inflation into account in just 10 years from now your mortgage repayments will be LESS than your rent. It's very simple mathematics.........

And in 25 years from now your mortgage repayments will be peanuts compared to your rent. And the best part of all - you'll end up OWNING your property - you won't have bought it for your landlord!

OK, I will bite one last time (even though you haven't risen to the challenge of finding me a cheaper mortgage).

I am not suggesting that people shouldn't buy *if* they can afford to.

The point is, if people can't afford to rent NOW *and* save on top, then they can't afford a mortgage. It doesn't matter how cheap or expensive it might be in the long run. I'm not even debating long term costs. That's not what this thread is about. You have yet to show me a fixed rate mortgage that would be cheaper than renting.

And you can't just use the argument that oh, well, yes, it might be more expensive *now* but in a few years I'll be better off, because people renting *now* are saying that they can't afford any extra which is why they can't save for a deposit.

breadlinebetty

Idiophreak wrote: »

Just ignore Brit's contribution on house price threads...He's openly got an interest in trying to discourage buying and his desperation to do so clouds his judgement at times

Haha, it seems Brit's been trying to stop people buying since he joined MSE, about 5 years ago? He's forecast some excellent doomsday predictions too - none of which have happened. One was that all property would nosedive by 60% in 2011 :rotfl:

Of course, the REAL reason he's doing it is he's DESPERATE to buy a place in London!

breadlinebetty

InMyDreams wrote: »

OK, I will bite one last time (even though you haven't risen to the challenge of finding me a cheaper mortgage).

I am not suggesting that people shouldn't buy *if* they can afford to.

The point is, if people can't afford to rent NOW *and* save on top, then they can't afford a mortgage. It doesn't matter how cheap or expensive it might be in the long run. I'm not even debating long term costs. That's not what this thread is about. You have yet to show me a fixed rate mortgage that would be cheaper than renting.

And you can't just use the argument that oh, well, yes, it might be more expensive *now* but in a few years I'll be better off, because people renting *now* are saying that they can't afford any extra which is why they can't save for a deposit.

You still seem to be missing the point :

IT'S OFTEN CHEAPER TO PAY A MORTGAGE EACH MONTH THAN IT IS TO RENT.

FACT.

Therefore, it's pretty stupid to pay MORE in rent and try to save WHEN INTEREST RATES ARE SO LOW, isn't it?

It makes economic sense to pay a mortgage each month.....

If you shop around for good mortgage deals (something you CAN'T do with rents!) you should be able to find the one you keep asking me about.......

As an aside I know someone who's on a 15 year fixed rate mortgage at a lofty 6.9%, which they took out in 2007, so they have 10 years repayments left. I think they could have got a better deal, but they were desperate to purchase their dream home and had some previous bad credit - hence the mortgage company screwing them for 6.9% depoait..

They borrowed £80k (paid a very very large deposit of £250k) and are paying back £600 a month repayment mortgage. That property would fetch £1,500 a month income. So there's an example for you.