It’s (nearly) £900 a year more expensive to rent than buy

Alex Johnson

fa87015c51413aa75a3ff1e4d4a53faaec328e4c 300x199 Its (nearly) £900 a year more expensive to rent than buyHomebuyers in the UK are £875 a year better off buying their own home instead of renting, according to research by Halifax. The average monthly costs associated with owning a three bedroom house were £672 in June 2013, 10% lower than the typical monthly rent of £745 paid on the same property type.

A house price sentiment index for Knight Frank for September shows that householders expect sharper increase in prices over next 12 months than at any time since January 2010 (although there are obviously some problems with sentiment indices, they do seem to offer a reasonable guide to future house pricing). The expectations were highest in London, and lowest in Wales and the North East with those aged between 45 and 54 most optimistic that prices will rise over the next year.

There has been a big change in the figures over the last five years. In June 2008 the average monthly cost of homeowning was £352, or 49% higher than renting. According to Halifax, the improvement in the affordability of buying relative to renting since 2008 reflects a 37% decline in home buying costs over the past five years.

Lower house prices and mortgage rates have contributed to making home buying more affordable. According to the report’s figures, the average mortgage rate for a new borrower has fallen over the past five years from 5.88% in June 2008 to 3.57% in June 2013. The average house price has fallen by 13% over the same period. The typical rent paid, however, has increased by 13% since June 2010.

Buying a house is more affordable than renting in all but two regions in the UK. Average monthly buying costs in both Yorkshire and the Humber and Wales are marginally higher (1%) than average monthly rental costs. On the other hand, buying is most affordable compared to renting in percentage terms in Northern Ireland where the typical homebuyer paying £47 a month less than the average renter (£369 against £415). The average monthly cost of buying in London is £98 lower than renting.

Martin Ellis, housing economist at Halifax, said: “A combination of lower mortgage rates and declining house prices has substantially reduced the cost of buying over the past six years. Nevertheless, the number of home buyers in the twelve months to June 2013 was nearly half of that in 2008, which will have been constrained by worries over job security. We understand that building a deposit is still a key challenge for those looking to get on the ladder, although once this has been achieved, buying is much more affordable. Whilst optimism in the housing market has improved in recent months these factors remain key obstacles to home purchases.”

Landlord insurance problems
AXA has warned that around one in four residential landlords in the UK has the wrong or no insurance and that around three quarters of these have bought regular household insurance instead of a commercial policy, leaving themselves vulnerable to having any claims turned down.

The research also exposed other areas where landlords are leaving themselves and their tenants unprotected with only half saying they have a tenancy agreement, and less than a third have a current inventory.

Darrell Sansom, managing director at AXA Business Insurance said: “While many of these people may well have never intended to become landlords and possibly it is something they would rather not have to think about, the consequences of not sorting out some of the basic admin and putting some core protection in place could make it a much bigger headache for them than it already is.”

Pictured is a one bedroom flat for sale in Skeldergate, York, for £115,000, on with Lancaster Samms.

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  • Rama Singh

    The analysis in the article is very good and pretty expressive to
    better off buying their own home than renting as it save lot of expenditure and
    have additional benefits.

  • Alex_Atkin_UK

    What the article fails to mention is that many of us are well aware of how much we are being ripped off renting but will never have the job security to be able to risk getting a mortgage. Buying is simply not to an option for many people.

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