Does Saving (and renting) now outweigh the benefits of buying?

Dadada486

Hi all, so I have been saving for a long time and have accumulated quite a bit. I was originally doing this for the deposit. However, as we all know, the economy has been turbulent over the past 6 months. This morning I saw that savings interest rates have gone up significantly, such that you can do quite well if you retained these savings. Does this now outweigh the benefit (including long term benefits) of buying a flat? I'm open to continue renting for a short period of time, before finally buying. 

eskbanker

There are too many variables involved to give a one-size-fits-all answer to that, the biggest of which would be the direction of property prices for your particular type of property and location, but you'd need to model that with some assumptions, together with assumed savings interest income and how rental costs compare with assumed mortgage costs, etc.

masonic

You could use the following calculator to get a guide: https://www.nytimes.com/interactive/2014/upshot/buy-rent-calculator.html
It's based on the US market, but things like property taxes can be set to zero and the currency can be ignored.

jimjames

I can't see any benefit long term of renting rather than buying IF you can afford to buy. Seeing people get into retirement and still need to be paying rent with no security of tenure seems very sad to me.

Johnjdc

On a cashflow basis almost certainly, especially if you can shelter your savings from tax.

On an overall basis including capital losses and gains, likely yes for the next year or two but probably not long term, particularly if inflation stays high.

mark_cycling00

Get a 1yr rental. 
Wait until house prices start rising again

Try to time a purchase to coincide with end of rental
Oh no people are gazumping and outbidding us

Lose out on house purchase
Extend rental again

Try to buy a different house that's within budget

But prices have gone up

Get annoyed, search larger area
Oops time to extend rental again

Etc etc 

MikeJXE

It depends on what you want out of life and how old you are 

I was faced with that choice when I sold my home 3 years ago, I did the maths, buy at the same value and live as I am or rent but how long would my money last with the extra expense of renting

I worked it out at 20+ years and at 80 that was enough for me. After the first year I realised the money would last twice that long 

So 2 years ago I gave half of it to my kids and grandkids 

I live in a 1 bed flat now, cheap to run, no maintenance, no buying white goods no garden to care for. 

All good from my point of view and happy as Larry 

P1Fanatic

With such little detail its impossible to give specific advice. Comparing rent vs mortgage on a comparable property is the obvious starting point. And then work out how much interest your savings will generate over that period (assuming you dont end up using some of it as emergency fund or buying a car, holiday etc). The obvious difference being that if you are renting you will still be paying that cost out later in life when you are focusing on retiring and reducing your expenditure.

MEM62

Dadada486 said:

I saw that savings interest rates have gone up significantly, such that you can do quite well if you retained these savings. Does this now outweigh the benefit (including long term benefits) of buying a flat? 

In the long term probably not.  Ideally, by the time you reach retirement you want a roof over your head that you own with no mortgage on it.      

Alexland

Dadada486 said:

This morning I saw that savings interest rates have gone up significantly, such that you can do quite well if you retained these savings.

Savings rates going up usually means mortgage rates going up which means the amount of money people can afford to borrow on a mortgage is reduced which impacts house prices making them more attractive so it all balances out give or take.

Best time to buy a property is when you are settled in an area and can afford something good that would meet your needs. If you try and time the market you may win or lose nobody knows what will happen next the market has already generally priced in the probabilities. If you win by delaying great, but if you lose it could be a problem if changes in market prices, interest rates, etc mean you can no longer afford what you need.

Renting is a waste of money so if you can afford to buy and start your mortgage earlier then I would just go for it and not hold back on living your life as desired. This decision is more than a mathematical calculation.

I saved up a circa 30% deposit for my first property while living as a well paid lodger for around 4 years and in retrospect I wish I had bought a couple of years earlier as prices were going up all the time I was saving, it would have given me an earlier start on clearing down the mortgage balance and I would have had a nicer quality of life in those years.

Someone once wisely said to me "When's the best time to buy property? Now if you can".

km1500

If the mortgage ***interest** would be M and the rental R then it is easy to work out if you would be better off.

Then you need to factor in if house prices would increase during the period you were renting - or, indeed, decrease

Then you need to factor in if the mortgage rate you got today would be better or worse than the rate you would get at the end of the rental period.

Factor in any possible stamp duty changes between now and then

While you are renting you won't be liable for any repairs and maintenance - if you bought then you would. Make an allowance for this.

Put all this together and make a decision