737 Posted June 21, 2005 Share Posted June 21, 2005 Interesting article; It is £37,000 cheaper to buy a property over 25 years than to rent one, despite soaring house prices, research showed today. http://money.guardian.co.uk/businessnews/s...1510743,00.html Quote Link to comment Share on other sites More sharing options...
bubble Posted June 21, 2005 Share Posted June 21, 2005 Yeah and they also used to say that if you bought shares you couldn't lose over 5 years, shame about those that bought in 2000...There's no surpise that you're better off buying based on the the last 5 years of housing price gains... Quote Link to comment Share on other sites More sharing options...
spoon Posted June 21, 2005 Share Posted June 21, 2005 they quote precise numbers yet competely fail to even hint at their methodology. note that they decline to name a journalist. that's always a dead giveaway. Quote Link to comment Share on other sites More sharing options...
737 Posted June 21, 2005 Author Share Posted June 21, 2005 It all comes down to the assumptions:Theirs are laughable <{POST_SNAPBACK}> Yes, seems you're laughing if you're the tenant of a big house or the landlord of a small house. All in all it seems a fair report to me. Quote Link to comment Share on other sites More sharing options...
JBFTB Posted June 21, 2005 Share Posted June 21, 2005 What a load of utter cobblers! Figures? Where are the figures? None of it makes any sense. They suggest if I bought the flat I used to live in (for sale at £125k) I would pay tens of thousands less than if I rented it?? So going to a random bank (HSBC) website and putting in my figures (£10k deposit, full repayment not interest only, 25 years, 3 year fixed rate, etc. etc.)... £705.91 pcm Rent? £525.00 pcm Even if I knock them down by £10k, I still end up with £644.52 pcm How, exactly, am I saving tens of thousands by buying this??? Quote Link to comment Share on other sites More sharing options...
737 Posted June 21, 2005 Author Share Posted June 21, 2005 What a load of utter cobblers!Figures? Where are the figures? None of it makes any sense. They suggest if I bought the flat I used to live in (for sale at £125k) I would pay tens of thousands less than if I rented it?? So going to a random bank (HSBC) website and putting in my figures (£10k deposit, full repayment not interest only, 25 years, 3 year fixed rate, etc. etc.)... £705.91 pcm Rent? £525.00 pcm Even if I knock them down by £10k, I still end up with £644.52 pcm How, exactly, am I saving tens of thousands by buying this??? <{POST_SNAPBACK}> Mortgage in 20 years time still £705 - Rent in 20 years time £1100 ? Mortgage in 26 years time £0 - Rent in 26 years time £1300? Quote Link to comment Share on other sites More sharing options...
spoon Posted June 21, 2005 Share Posted June 21, 2005 it's pointless even evaluating the article without knowing the methodology. at the very LEAST choosing to rent over buying provides you with a NEARLY ZERO COST 1 YEAR PUT on house prices. Quote Link to comment Share on other sites More sharing options...
Ah-so Posted June 21, 2005 Share Posted June 21, 2005 At current prices I cannot see how any property would be cheaper to buy than to rent at current market prices. Not many rents would even cover the interest portion of a mortgage at present. As for their methodology, they must be doing some kind of projection based on historical increases in house prices & mortgage rates v. rents over a 25 year period. Does this also include the fact that a 30 yr-old that does not buy will have to rent for 45 years until death, compared to a buyer who pays off a mortgage for 25? Quote Link to comment Share on other sites More sharing options...
JBFTB Posted June 21, 2005 Share Posted June 21, 2005 Mortgage in 20 years time still £705 - Rent in 20 years time £1100 ? Mortgage in 26 years time £0 - Rent in 26 years time £1300? <{POST_SNAPBACK}> I said 3 years FIXED...mortgage in 3 years time could be ANYTHING. If interest rates go up (and lets face it they're historically pretty damn low) the mortgage payments could be way up over £1300 in just 3 years. Quote Link to comment Share on other sites More sharing options...
erd Posted June 21, 2005 Share Posted June 21, 2005 I said 3 years FIXED...mortgage in 3 years time could be ANYTHING. If interest rates go up (and lets face it they're historically pretty damn low) the mortgage payments could be way up over £1300 in just 3 years.<{POST_SNAPBACK}> be interesting to see the figures if you rented for 3 years, then bought a place for 30% less on a 22 year mortgage. Maybe they could give us the figures for that, or wouldn't that fit into their VI methodology? Quote Link to comment Share on other sites More sharing options...
hra Posted June 21, 2005 Share Posted June 21, 2005 It all comes down to the assumptions:Theirs are/ must be laughable <{POST_SNAPBACK}> Maybe Abbey's own media contacts could throw some light on this. http://www.aboutabbey.com/home/media_centr...e-press_off.htm Quote Link to comment Share on other sites More sharing options...
runforthehills Posted June 21, 2005 Share Posted June 21, 2005 Mortgage in 20 years time still £705 - Rent in 20 years time £1100 ? Mortgage in 26 years time £0 - Rent in 26 years time £1300? <{POST_SNAPBACK}> Hello all Discovered this website a few days ago and am very inspired and just a tiny bit obsessed! Ive always been thinking along the lines of the relative mortgage payment pain gradually getting less over the years compared with rents going up (as above). Yet I have decided that instead of trying to upgrade to a 2-bed flat in London from a 1-bed (buying)...which was scaring the hell out of me (£1000pm mortgage with £45k deposit-interest rates up after 3-year fixed rate.. terrifying, possible neg equity and stuck for 10 years..no way!!). Anyway am going to rent for a year (same as current mortgage payments) then re-assess. Always hated renting tho and now have a baby, but will forego security and follow instincts and take a gamble (tho the other senario is a terrible gamble as well) Thank everyone for all your opinions Would be interested to know what you all say about the decreasing mortgage versus rising rents theory. Quote Link to comment Share on other sites More sharing options...
gilf Posted June 21, 2005 Share Posted June 21, 2005 Mortgage in 20 years time still £705 - Rent in 20 years time £1100 ? Mortgage in 26 years time £0 - Rent in 26 years time £1300? <{POST_SNAPBACK}> Sorry we didn't realise you could predict future interest rates.... We all know they are at a historically low amount, if we put them back at something like the average of 8% your monthly payment is up to £897.75 So rent at £525, save the difference between that and the £897.75 (plus your £10K deposit) in a savings account and you will have £103,566.28 in just 11 years.... So buy now and wait 20 years to pay it off or rent for 11 years and then buy it. The point is that it's not a case of buy = bad, rent = good... it's a case of buy now = bad rent now = good, given a couple of years it will tip the scales and buying will be the thing to do. This report is saying buying is better at a time when it's at it's worst. Quote Link to comment Share on other sites More sharing options...
non-FTBer Posted June 21, 2005 Share Posted June 21, 2005 (edited) Figures for me: What a house I'd want would cost today: £250,000 If I buy today assuming interest rates remain the same, cost over 25 years: £463,739 If I rent for 3 years at current rental price: £21,600 Then buy, assuming identical IRs, on 22 year mortgage, and a 30% reduction (£175K): £286,813 And these figures assume I tie up £20K+ of capital as a deposit on a house. I could invest that £20K elsewhere and make some money instead. [used same IR for both calculations] So, by renting for 3 years whilep prices fall 30%+ I will save approx: £463,739 - £286,813 - £21,600 = £155,326 This means I actually save most of the purchase price in scenario 2. This is how compound interest works folks..... don't fall for it. Edit to take into account rental spending.... doh! Edited June 21, 2005 by non-FTBer Quote Link to comment Share on other sites More sharing options...
RJG18 Posted June 21, 2005 Share Posted June 21, 2005 Mortgage in 20 years time still £705 - Rent in 20 years time £1100 ? Mortgage in 26 years time £0 - Rent in 26 years time £1300? <{POST_SNAPBACK}> Cash in bank (inc compound interest) by banking the money saved each month from renting - £103,090.50 (given a monthly saving of £180, calculated as £705 - £525). Quote Link to comment Share on other sites More sharing options...
Nomadd Posted June 21, 2005 Share Posted June 21, 2005 ...given a couple of years it will tip the scales and buying will be the thing to do. Dream on. The biggest housing bubble in history has taken 5-7 years to build. Yes, there will be a big 'bang', but - just like every other collapse - it'll take several years to hit the bottom. I'd say at least 5 years. Where I live - North London - my next door neighbour has just moved in. She pay's £1,100/month in rent. Repayment mortgage on the same place is £2,400/month. Can't see that gap shrinking to something making buying a better bet in just 2 years. Just my two cents... Nomadd Quote Link to comment Share on other sites More sharing options...
red Posted June 21, 2005 Share Posted June 21, 2005 Hello allDiscovered this website a few days ago and am very inspired and just a tiny bit obsessed! Ive always been thinking along the lines of the relative mortgage payment pain gradually getting less over the years compared with rents going up (as above). Yet I have decided that instead of trying to upgrade to a 2-bed flat in London from a 1-bed (buying)...which was scaring the hell out of me (£1000pm mortgage with £45k deposit-interest rates up after 3-year fixed rate.. terrifying, possible neg equity and stuck for 10 years..no way!!). Anyway am going to rent for a year (same as current mortgage payments) then re-assess. Always hated renting tho and now have a baby, but will forego security and follow instincts and take a gamble (tho the other senario is a terrible gamble as well) Thank everyone for all your opinions Would be interested to know what you all say about the decreasing mortgage versus rising rents theory. <{POST_SNAPBACK}> The 'rent versus mortgage' argument ultimately boils down to this: Buy at the top of a market (ie: now) and you will feel like you are throwing your mortgage money down the drain as the value of your property plummets. Your deposit will be eroded and you may even suffer neg. equity. When you eventually pay it off, you may regret buying when you did, particularly when you look at how much compound interest payment you've made! Buy at the bottom of the market with the prospect of CAPITAL GROWTH in your property, and your mortgage will seem like a better investment. Rent works in a similar way: Paying rent at the moment makes sense because your landlord is effectively subsidising you whilst property prices slide. The argument that 'rent is dead money' is keenly exercised during property price RISES. In conclusion, the decreasing mortgage versus rising rents theory really depends on when you take the plunge. In your situation, renting for at least another year is a no-brainer. Do it! And welcome to the site! Quote Link to comment Share on other sites More sharing options...
gilf Posted June 21, 2005 Share Posted June 21, 2005 Dream on.The biggest housing bubble in history has taken 5-7 years to build. Yes, there will be a big 'bang', but - just like every other collapse - it'll take several years to hit the bottom. I'd say at least 5 years. Where I live - North London - my next door neighbour has just moved in. She pay's £1,100/month in rent. Repayment mortgage on the same place is £2,400/month. Can't see that gap shrinking to something making buying a better bet in just 2 years. Just my two cents... Nomadd <{POST_SNAPBACK}> I agree, I meant to say or at least convey that right now renting is better than buying but equally that at some point int the future it will not be the case. I used a couple as throw away term to mean not now but in the not too distant future, I think 5 is a bit too long. Quote Link to comment Share on other sites More sharing options...
Red Baron Posted June 21, 2005 Share Posted June 21, 2005 Mortgage in 20 years time still £705 - Rent in 20 years time £1100 ? Mortgage in 26 years time £0 - Rent in 26 years time £1300? WRONG. Mortgage in 26 years 0. But what about the opportunity costs of the money now locked up in the property? (opportunity costs = what you could earn with that money if it was invested elsewhere). When will people learn that there is no such thing as a 'free' house. Quote Link to comment Share on other sites More sharing options...
Guest STR2004 Posted June 21, 2005 Share Posted June 21, 2005 This excellent spreadsheet (posted on HPC before - apologies can't remember original author) shows whether you're better off buying or renting. Excel Spreadsheet Quote Link to comment Share on other sites More sharing options...
737 Posted June 21, 2005 Author Share Posted June 21, 2005 I should point out that I'm actually an STR who's sold a relativley expensive home and is renting similar. Over the next year, presuming house prices don't rise, I will save a couple of £K. However, the article is not aimed at short term renters but those who rent for a life time and when looked at in those terms is pretty accurate I feel. As an aside I certainly won't rent for long. After 30 years of owning my own property I find it slightly demeaning to live in someone elses with all that entails. Quote Link to comment Share on other sites More sharing options...
zorn Posted June 21, 2005 Share Posted June 21, 2005 What a load of utter cobblers!Figures? Where are the figures? None of it makes any sense. They suggest if I bought the flat I used to live in (for sale at £125k) I would pay tens of thousands less than if I rented it?? So going to a random bank (HSBC) website and putting in my figures (£10k deposit, full repayment not interest only, 25 years, 3 year fixed rate, etc. etc.)... £705.91 pcm Rent? £525.00 pcm Even if I knock them down by £10k, I still end up with £644.52 pcm How, exactly, am I saving tens of thousands by buying this??? <{POST_SNAPBACK}> In the year 2030 your mortgage repayments will still be £705.91 pcm (give or take, depending on interest rates), and in 2031 they'll be £0 pcm. In 2030 your rent will be something like £1,750 pcm, and in 2031 it will be £1,800 pcm. You save the money at the back end, not the front end, of the 25 year period. Quote Link to comment Share on other sites More sharing options...
right_freds_dead Posted June 21, 2005 Share Posted June 21, 2005 cheaper that is, until the IR rises. which it will - or inflation will rise. they cant have it both ways. also buying for that price gets you a total dump on a sink estate. flawed reporting from what must surely be a guardian based VESTED INTEREST. a real paps paper for inbred morons. Quote Link to comment Share on other sites More sharing options...
runforthehills Posted June 21, 2005 Share Posted June 21, 2005 The 'rent versus mortgage' argument ultimately boils down to this: Buy at the top of a market (ie: now) and you will feel like you are throwing your mortgage money down the drain as the value of your property plummets. Your deposit will be eroded and you may even suffer neg. equity. When you eventually pay it off, you may regret buying when you did, particularly when you look at how much compound interest payment you've made! Buy at the bottom of the market with the prospect of CAPITAL GROWTH in your property, and your mortgage will seem like a better investment. Rent works in a similar way: Paying rent at the moment makes sense because your landlord is effectively subsidising you whilst property prices slide. The argument that 'rent is dead money' is keenly exercised during property price RISES. In conclusion, the decreasing mortgage versus rising rents theory really depends on when you take the plunge. In your situation, renting for at least another year is a no-brainer. Do it! And welcome to the site! <{POST_SNAPBACK}> Thanks I didnt mention that i bought 3-years ago and am upgrading for an extra bedroom. On market for 2 weeks and hoping that it goes quickly (is 'realistically priced'!)....but feel a bit panicky. Have llots of friends that are dying to buy and I am telling them to wait. Rents are ridiculous as well in North London, do you see them dropping or will it become more difficult to find good properties as the FTB sit out the storm? Quote Link to comment Share on other sites More sharing options...
red Posted June 21, 2005 Share Posted June 21, 2005 ThanksI didnt mention that i bought 3-years ago and am upgrading for an extra bedroom. On market for 2 weeks and hoping that it goes quickly (is 'realistically priced'!)....but feel a bit panicky. Have llots of friends that are dying to buy and I am telling them to wait. Rents are ridiculous as well in North London, do you see them dropping or will it become more difficult to find good properties as the FTB sit out the storm? <{POST_SNAPBACK}> I am in similar position (quite literally, as I live in North London, too!) having STR'd 3 months ago. I got as much as I could have expected for a house and am now living (renting) comfortably off the interest. Rents where I am (Highbury) are not too bad, but I don't see them dropping too much, sadly. There is a fairly steady demand for good quality accomodation around here. But as I said before, I console myself with the knowledge that prices are on the slide and that my landlord is subsidising my living. Good luck with the sale... Quote Link to comment Share on other sites More sharing options...
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