Affordability check: Buying compared to renting

Affordability in the property market is usually finely poised when it comes to renting versus homeownership but this spring, the pendulum has swung back in favour of buying a home.

Using the latest data available, Zoopla declared it is currently 20% cheaper for first-time buyers to purchase a property than it is to rent. The claim is based on the UK’s average monthly rent compared to a typical starter home mortgage repayment.

In monetary terms, buying a starter home works out £246 per month cheaper than renting. The portal worked out the figure using a typical first-time buyer scenario. It assumed a property was bought for £253,700, using a 20% deposit of £50,740. The mortgage term was 30 years and the interest rate was 4.5%. The rental benchmark was Zoopla’s current UK average - £1,248 per month.

While the initial costs attached to buying a home (deposit, stamp duty, legal fees, survey costs and mortgage arrangement fees) will require a lump sum, there are clear advantages to owning a property, and these include:

• A long-term investment: when you make each monthly mortgage repayment, you are making an investment in your future. Although there is no such thing as a risk-free investment, property has largely risen in value over the decades (based on Land Registry data, the average UK property has increased in value by 95% in the last 20 years). Many homeowners find that, when they come to sell, their home is worth more than they bought it for. 

• Security: although incoming reforms will give tenants more security in a rental property, it will still be possible for landlords to regain possession and ask a renter to move out. Owning your own home allows you to put down roots with the added peace-of-mind of not being moved on.

•  Freedom to decorate: almost every tenancy agreement will feature a clause that prohibits the tenant from making cosmetic changes to the property. Some landlords will even ban the use of Blu Tack and drawing pins. When you own your own home, you have the freedom to decorate however you want, so go ahead, buy that tin of purple paint.

• Release funds: over time, repaying a mortgage allows you to own a bigger share of your home and build a pot of equity. It is often possible to ‘release’ this equity by remortgaging. Essentially, this is borrowing back the money you have paid and the sum can be used however you see fit – extend or improve the property, purchase a car or book that holiday of a lifetime.

• Increase the value: it is usually possible to improve the value of a property via alterations and additions. From ambitious projects, such as loft conversions, extensions and internal remodelling, to modernisation via new kitchens, bathrooms and energy efficient measures, owners can make a home more attractive and valuable in their own time.

If you are a tenant and would like to know if it’s more affordable to buy a property than rent, contact us. We can take a look at your current outgoings, work with a mortgage adviser and book viewings that will put you on the path to homeownership.