Buying A Home Now £120 Cheaper P\m Than Renting

[Woot]

http://www.telegraph.co.uk/finance/personalfinance/9874093/Buying-home-120-cheaper-a-month-than-renting.html

Falling house prices and rising rents have made it £120 a month cheaper to buy a three-bedroom house than rent a similar property.

The average monthly cost of mortgage repayments, repairs and insurance is 16pc lower than the typical rent paid on an equivalent property, new research from Halifax shows.

The cost of buying a house has dropped by 34pc since 2008 because of falling property prices and mortgage rates. In contrast, the price of renting has risen 14pc since 2009.

The number of home purchases reached a five-year peak in 2012, but total sales were still 42pc lower than before the credit crisis.

Martin Ellis, housing economist at Halifax, said: “The sharp decline in home buying costs over the past few years, combined with a significant increase in rents, has greatly improved the financial attractiveness of buying a home. This shift has contributed to the increase in the numbers of house purchases.”

Buying a house is more affordable than renting across the UK. In London, homebuyers typically pay £193 a month less than the average renter, while in Yorkshire and the Humber there is virtually no difference, with average monthly rental costs £1 more than buying costs.

Halifax’s calculation of the monthly cost associated with buying a home does not include the deposit, which averages £27,984 for first-time buyers.

Raising a deposit and uncertain job security are still the main obstacles to people buying their own home.

Renting has traditionally been cheaper than buying a home. In 2008 the average cost of buying a house was £217 a month more than the average rent in the UK.

Rising rents and cheap mortgage finance have boosted the appeal of investment properties, with separate figures released this week from the Council of Mortgage Lenders showing nearly 1.5m people hold buy-to-let mortgages.

Buy-to-let lending accounted for 11.5pc of all mortgage lending in 2012, compared to 9.8pc the previous year.

If this is accurate, and this is part of a trend, where will that leave a. STRs, and b. BTLs?

Edited February 16, 2013 by Woot

[gf3]

I think there is something wrong in the figure.

Only Greater London is more than £120 and yet the average is £120

Edited February 16, 2013 by gf3

[Gone baby gone]

If this is accurate, and this is part of a trend, where will that leave a. STRs, and b. BTLs?

a. Paying a landlord extra money

b. Receiving extra money from tenants

Any more questions?

[Bruce Banner]

Depreciation..... Maintenance..... Liquidity..... Opportunity cost.....

[AvoidDebt]

I could buy for a lot cheaper than I rent. In fact most people would think I'm nuts if I showed them the figures however I refuse to prop up this vile system and bailout the government. Paying rent in order to put a roof over my head is the bare minimum contact that I can have with the market. Just like I don't buy pirated DVDs because I've been led to believe that the proceeds fund terrorist activities I refuse to participate in a fraudulent system.

[winkie]

Loss of returns from savings/investments......costs of buying ie: stamp duty, solicitors, surveyors, ground rent, vat.

Furnishings, decorating, DIY, home insurance, etc.

[TheCountOfNowhere]

the same report is on sky.

the v.i. media are out in force this year....seems the Halifax ( free state money distribution center ) says its time to buy...mostly likely using their government backed debt.

the country is a fooked.

[Bruce Banner]

the same report is on sky.

the v.i. media are out in force this year....seems the Halifax ( free state money distribution center ) says its time to buy...mostly likely using their government backed debt.

the country is a fooked.

Desperate attempts to suck more money into the bubble. The more the media/government/lenders/estate agents, tell me to buy, the more I know not to.

[The Masked Tulip]

Do you think with zero rates on savings, more people going into BTL, a weakening pound making buying property in the UK attractive and an influx of immigrants... that an actual housing crash is likely?

[Timak]

Averages mean nothing.

Find me a new 3 bedroom house in Cambridge for under £300k and a mortgage deal (plus opportunity cost on the deposit) that works out less than the £1.1k a month renting it would cost.

[NEO72]

Who'd have thought - money lender says lending money is good for you.

Love how they've ignored the trifling matter of a 27k deposit in their calcs too.

[erranta]

Loss of returns from savings/investments......costs of buying ie: stamp duty, solicitors, surveyors, ground rent, vat.

Furnishings, decorating, DIY, home insurance, etc.

They don't mention social housing entities and "investment" companies buying up hundreds of homes at a time (ex forces for instance) at well below market prices either

[Bruce Banner]

Do you think with zero rates on savings, more people going into BTL, a weakening pound making buying property in the UK attractive and an influx of immigrants... that an actual housing crash is likely?

Zero rates on savings?

A quick Google search will reveal instant access savings accounts that pay over 2%.

[Bruce Banner]

After tax and including inflation, i would call that zero.

Then you would be wrong!

Inflation, as I've explained to you many times before, depends on what the money is going to be used for. Money earmarked for the purchase of a house is appreciating relative to the depreciating asset.

Interest 2%, house depreciates 2%, 2 + 2 = 4. So, in a falling market, money put aside in a 2% deposit account is effectively earning 4% relative to a house.

[Wurzel Of Highbridge]

Which would be cheaper if interest rates rose to the dizzy heights of say 2%

[Bruce Banner]

Declan Curry is, along with his mate Ray Boulger, trying his best to convince the masses to BUY NOW, on his weekly "Your Money" program on BBC News .

[Bruce Banner]

I just dont get it.

Sorry, but I have to go out and don't have the time to explain it to you, yet again .

[zugzwang]

What about an Earth shattering 5%? Small beer less than a decade ago.

(In fact, I remember someone from the City telling me in the nineties that any mortgage under ten percent was a good rate, looking at the UK's postwar rate history! )

Ernst & Young is projecting a 10 yr gilt yield of 4.2% by 2016 which would put the average SVR up around 7%.

http://www.whatinves...e-returns.thtml

.

[The Knimbies who say No]

Ernst & Young is projecting a 10 yr gilt yield of 4.2% by 2016 which would put the average SVR up around 7%.

http://www.whatinves...e-returns.thtml

.

Apologies if you've done this elsewhere, I'd be interested to know a bit about the relationship between SVRs and Gilt yields i.e a 10 year gilt yield of x equates to roughly an SVR of y. How to you estimate one from the other? Is it a straightforward x+3%=y, or some more proportional relationship.

[zugzwang]

Do you think with zero rates on savings, more people going into BTL, a weakening pound making buying property in the UK attractive and an influx of immigrants... that an actual housing crash is likely?

That depends whether you believe Osborne can pull another trillion quid out his ass to keep the UK economy upright...

[R K]

Cost of renting > cost of buying is an early indicator of the start of a new uptrend.

Whether their numbers are correct or not is moot, but since the nominal low was in March/April '09 (4 years ago now) and owning appears to be moving towards being cheaper than renting this will in due course signal the end of the downtrend and the turn into an uptrend again, overall. Irrespective of individuals own circumstances/liquidity preferences.

Just saying fellas.

Edited February 16, 2013 by R K

[zugzwang]

Apologies if you've done this elsewhere, I'd be interested to know a bit about the relationship between SVRs and Gilt yields i.e a 10 year gilt yield of x equates to roughly an SVR of y. How to you estimate one from the other? Is it a straightforward x+3%=y, or some more proportional relationship.

x + 2.75% is the rule of thumb I use i.e today's 10yr yield 2.15 + 2.75 = 4.9%.

The current average SVR is 4.88%.

[cybernoid]

Which would be cheaper if interest rates rose to the dizzy heights of say 2%

Indeed, and cost of borrowing has everything to do with the market rather than the politicos or BOE. £120 is obviously the maximum they could come up with, seeing as its from a mortgage lender, and even then is a small price to pay for an insurance policy against such an enormous and looming downside. You take this route and you'll be a looking at an interest payment increase of considerably more than £120 a month before long.

Do you think with zero rates on savings, more people going into BTL, a weakening pound making buying property in the UK attractive and an influx of immigrants... that an actual housing crash is likely?

Return on savings is comparable to return on BTL, any positive difference is more than taken care of by capital value loss and increase in the gap between the rising interest payment and reduced rent affordability over quite a short space of time in my view.

That doesn't mean that people are not still interested however, as we know they simply do not do their sums, but I don't see more people piling in now, the credit isn't there anymore.

Pound is being devalued so yes foreign investors are going be propping things up, will depend on region, london in particular is its own market. However consider that when the owners of property stop being the locals and the conditions turn again to be less favourable they will be gone as quickly as they came, they aren't trapped here like owner occupiers. So in my opinion London has problems storing up for a future date, outside of london I don't see any foreign investment.

My take away from this is that £120 a month, even if that is true, is a small price to pay to shelter your capital from whats coming.

[The Knimbies who say No]

x + 2.75% is the rule of thumb I use i.e today's 10yr yield 2.15 + 2.75 = 4.9%.

The current average SVR is 4.88%.

Thanks.

[cybernoid]

Is it not clear by now HPC IS AND WILL BE PREVENTED FROM HAPPENING (especially in the SE).

A continued fall is my prediction. Whether you define that as a 'crash' or not doesn't matter too much in my view, if you take a reasonable assumption for your interest rate over the lifetime of your potential mortgage, make a reasonable estimate as to the rate of capital value decline you can compare the costs of buying versus renting. It will vary depending on whether you need to borrow at all, and will be influenced by other needs such as security of tenure.

There is plainly no rush to get into this market, but if now is the right time for you to buy then go ahead.

IR are not going anywhere for a long time.

If you're talking about the BOE set base rate, then I can see a case for it staying low, however there have been recent rumblings about an increase to at least look like they give a damn about the inflation they have stoked with QE.

But that doesn't matter all that much, the cost of borrowing is what sets mortgage costs and that has had little to do with the base rate for some time now.

This viewpoint will probably not be popular but come on guys face reality.

For as long as prices continue to fall I see no reason to take on such a commitment, particularly in times such as these. Peoples needs vary so for some it might make sense to buy now, do what you want.