Of course it appears cheaper!

by Property118.com News Team

9:19 AM, 20th June 2018
About 3 years ago

Of course it appears cheaper!

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Of course it appears cheaper!

Santander Bank have issued a widely reported press release: “Owning a home is cheaper than renting in all areas of the UK

The Bullet points of their latest research below:

  • Average first-time buyers could save over £2,250 a year once on the property ladder compared to renting
  • Londoners could make the biggest saving, as the average monthly rent is £289 higher than monthly mortgage payments
  • Smallest differential between rent and mortgage payments is in the East of England at just £43 per month

“The research shows that homeowners could save £2,268 a year if they were able to purchase a property rather than rent. The average monthly rent in the UK is currently £912 per household, compared to monthly repayments of £723 for the average first-time buyer household. Homeowners could save an average of £189 a month or £2,268 a year compared to renters.”

Of course renting at first glance will appear more expensive if you only compare it against mortgage payments! However how about the cost of:

  • Saving up Thousands of Pounds for a Deposit, Legal fees, Stamp Duty, valuation survey fees, lenders fees.
  • Property maintenance costs
  • Insurance costs
  • Building up a suitable credit profile and history
  • The opportunity cost for lack of mobility
  • I am sure readers can add many more in the comments section below

The above is only like for like between renting and living in your mortgaged property and doesn’t even start to take into account the additional costs for landlords to provide a service.

Miguel Sard, Managing Director of Mortgages at Santander UK said: “Many first-time buyers understandably focus on the challenge of saving for a deposit and wonder how they will afford a property. However, it is often assumed that when you purchase a property you will be under greater financial pressure and our research shows the reverse is true.

“Of course, buying a property is a major financial investment with upfront costs to consider, but long-term the financial benefits can be significant. With annual savings averaging well over £2,000, this can really mount up over time and of course once the mortgage is paid off you have a valuable asset to show for it. Getting independent advice and looking for competitive rates, is crucial to get the right mortgage to meet potential homeowners individual needs.”

The release continues:

“With the average first-time buyer deposit being £51,905, hopeful buyers are opting for alternative methods of saving. One in five (22 per cent) of those wanting to buy would consider selling shares in the property, offering a potential capital return when the property is sold, 38 per cent would consider moving back in with their parents while saving for a deposit and 21 per cent said they will give up alcohol to raise the funds. Other financial products UK adults looking to buy could use to help them get on the property ladder include Santander’s Regular eSaver account which pays up to five per-cent interest, or government funded plans such as Help to Buy and the Starter Home scheme.

Historically, renting has appeared cheaper, especially in areas like London and the South East, where property prices have consistently been high. But since 2010, where the economy saw a re-set, the UK has seen inflation fall and with it mortgage rates have come down significantly, meanwhile rents have steadily crept up.

Prospective first-time buyers in London are set to make the biggest monthly savings by making the switch from renting to property ownership, as average rents exceed mortgage payments by over £289 a month or £3,468 a year. First-time buyers in Northern Ireland would see themselves £178 better off per month. At the other end of the scale are those living in the East of England, where typical first-time buyer monthly mortgage payments exceed average rents by only £43.”

Table one: Comparison of average rental and mortgage costs by region

Comments

Ian Narbeth

15:36 PM, 20th June 2018
About 3 years ago

"Average first-time buyers could save over £2,250 a year once on the property ladder compared to renting".
In many parts of the country the ladder is or may soon become a snake. Owning your own home seems like an easy way to make money as the value of the house goes up while you sleep. Problem is when there is a correction in prices and a flattening of price increases (a) buyers may find themselves with reduced or even negative equity and (b) prospective buyers may decide to wait and see before buying so the market will cool down.
I can remember in the 1990s when people were trapped in negative equity for years and could not move house.
We should also mention SDLT and selling agents' fees when you move.

Old Mrs Landlord

16:41 PM, 20th June 2018
About 3 years ago

Reply to the comment left by LVW4 at 20/06/2018 - 12:04I think the difference is that the council house dwellers of my youth and possibly yours too were all in work, albeit on low pay. These days most of them seem to be on benefits or working the minimal hours necessary for them to receive working and child tax credits together with other perks such as free school meals, which bring their incomes up to or above what full-time low-paid workers get after tax and the expenses of employment. Many are second or third generation unemployed who have always had everything given to them so do not appreciate it, unlike those who have had to work for what they've got.

David Price

17:18 PM, 20th June 2018
About 3 years ago

Reply to the comment left by Mark Alexander at 20/06/2018 - 15:33
And there Mr Alexander I think you have hit the nail on the head. The only reason for encouraging home ownership is so that the government has something to confiscate to pay for you end of life care. Why else should any government care what sort of tenure you have for he roof over your head?

Steve Clark

19:46 PM, 20th June 2018
About 3 years ago

It would be disingenuous of me to agree that renting makes more sense than taking out a mortgage.
It is precisely because I did get on the property ladder all those years ago that i now have a property portfolio.
Also I am encouraging my children to get on the ladder!
Having said that, being an owner occupier is not for everyone and nor is being a Landlord!

Be a Landlord

14:06 PM, 23rd June 2018
About 3 years ago

Its irresponsible for Santander to use the term 'better off' when comparing monthly mortgage payment versus rent. If you buy a flat in London you will have service charges of at least £200 a month. My place has reached a ridiculous £3600 per year. On top of that you can expect maintenance costs for appliances and wear and tear. They also fail to assign a cost to the £134000 deposit in the London example.

H B

14:26 PM, 23rd June 2018
About 3 years ago

Of course the cost of buying always assumes you have a deposit so it is not necessarily like with like - rent is always for 100% of the property whereas buying you are paying interest only on a portion of the value of the property.
Naturally the bigger the deposit the relatively cheaper it is to buy.

Most people want to buy - they just can't afford to and that is where we come in - providing property to those who cannot afford to buy.

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