Fri 2nd May, 2008
Gap between cost of buying and renting narrows
Whilst it is still cheaper to buy a property and pay a mortgage over 25 years than it is to rent a property, the saving made by homeowners has gone down by 75% in the past year according to new research.
Figures show that over a traditional 25-year period of a mortgage, buying a property costs an average of £437,925. This figure is only slightly ahead of the average for renting a property for 25 years which cost an average of £443,736.
While in past years buyers could have expected to save somewhere in the region of £24,000 over 25 years, the impact of rising interest rates and rising house prices means now that the difference between buying and renting has fallen to just £5,811.
In some areas of the UK it is actually now cheaper to rent a property than it is to buy one.
Northern Ireland is a particularly bad area for buying when compared to renting. Property prices have gone up by 40% in the past year meaning that the average house buyer will now pay £572,814 for their property over 25 years while renters will only pay £392,097 for renting the property over the same period. This means by renting a property you will save a massive £180,717 over 25 years.
While the figures do include maintenance costs they do not include set-up costs for home loans. The figures also suggest that it would be cheaper to rent a property in Wales, the north-west of England, Greater London and Yorkshire.
Obviously these figures look at the matter solely from the view of payouts, and not from the security gained from home ownership. Additionally, equity grows as home loan repayments are made and as house prices rise, allowing homeowners to borrow secured loans against their property for both property improvement and equity release purposes.