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Orsino

Buying Is £1,300 Pa Cheaper Than Renting

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Well that's according the the Halifax and their cheerleaders at the BBC:

http://www.bbc.co.uk/news/business-28897774

First-time buyers now save £1,300 a year by taking out a mortgage rather than renting, according to Britain's biggest lender, the Halifax.

Based on a three-bedroom house, the average first-time buyer pays £677 a month. The average rent paid on the same-sized property is £787, giving owners a monthly saving of £110. But experts warn historically low mortgage rates would not have to rise by much for the reverse to be true. The report says, at present, buying is cheaper than renting in all regions, except the East Midlands and East Anglia.

Of course the small issue of debt is overlooked. On a personal note, a two-bedroom house in my street in east London is on the market for £825,000. I suppose a three-bed would be north of one million. I happily rent.

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Well that's according the the Halifax and their cheerleaders at the BBC:

http://www.bbc.co.uk/news/business-28897774

Of course the small issue of debt is overlooked. On a personal note, a two-bedroom house in my street in east London is on the market for £825,000. I suppose a three-bed would be north of one million. I happily rent.

As always. The rental rates will be wildly optimistic as well.

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A house we looked at yesterday was asking for £470,000 with the rental yield at £1400pcm which gives a gross rental multiplier of 28x, seems out of whack. The mortgage repayments would've been north of £1800. Seems cheaper to rent.

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Well that's according the the Halifax and their cheerleaders at the BBC:

http://www.bbc.co.uk/news/business-28897774

Of course the small issue of debt is overlooked. On a personal note, a two-bedroom house in my street in east London is on the market for £825,000. I suppose a three-bed would be north of one million. I happily rent.

I suspect the lenders are getting desperate.

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As always. The rental rates will be wildly optimistic as well.

And the last time I looked my landlord was responsible for maintenance, kitchen-appliances, washing machine, building-insurance, etc.

Obviously GBP 1300 a year leaves plenty of space cash once all of that has been paid.

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My theory that lenders will hard-switch to want lower house prices, to do a much higher volume of mortgage transactions, doesn't look strong, when Halifax and others still punting stuff like this. Anyway, this is what you get, and what you deserve, when you make up excuses for buyers "FTBs don't think for themselves" paying ever higher prices, still excusing them when they're paying half-a-mill for a converted garage home, attached to a proper house, in Chiswick.

http://www.theguardian.com/money/2014/aug/23/buying-home-cheaper-renting-average-tenant-halifax

Craig McKinlay, mortgage director at Halifax said: "It is clearly encouraging that since 2009 there has been a significant decline in the cost of buying a home for those trying to get on the housing ladder.

"The improvement is due to a combination of lower mortgage rates and rising private rents. In contrast, market conditions for renters have deteriorated as rents have risen over the same period."

The housing minister, Brandon Lewis, said the figures confirmed that the government's approach was working. He said: "We've cut the deficit to keep interest rates low, built half a million homes and helped thousands of responsible, hard-working people purchase properties with smaller deposits through Help to Buy."

However, Alex Hilton, director of the campaign group Generation Rent, called on politicians to take action to help those faced with rising costs. "It's untenable to suggest this is an acceptably functioning market and in an election year, we expect parties to tell us what they will do to fix this. Ten million tenants are being milked like cattle and this cannot continue."

Most homebuyers taking out new deals are fixing their interest rates as expectations grow of an interest rate rise from the current record low of 0.5%.

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Thats the best the mortgage lender can make it look? Oh dear.

Apart from maintenance etc there is opportunity cost of deposit cash, ease of moving for better work opportunities and simply a more varied and interesting life and the elephant in the room… the taking on of 25+ years of mortgage debt at emergency low interest rates at a time when property prices are unsustainably supported by government intervention. Apart from that, if you squint, and miss half of the costs out, you can save 100 quid a month. Today. But not really.

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They make my blood boil.

How can Craig McKinlay and Brandon Lewis stand there and spout this evil claptrap without dying of shame? Both quite happy to see 'improvements' in figures that are impoverishing a generation. They must be psychopaths, or idiots.

Who cares what mortgage rates are or what 'help' the government offers. Upwards of a quarter of a million is not and never will be a sensible amount of debt to be taking out.

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Well that's according the the Halifax and their cheerleaders at the BBC:

http://www.bbc.co.uk/news/business-28897774

Of course the small issue of debt is overlooked. On a personal note, a two-bedroom house in my street in east London is on the market for £825,000. I suppose a three-bed would be north of one million. I happily rent.

What have bedrooms got to do with it?

Within a few minutes travel from here you could pay £1.5million for a 2-bed place or £60k for a 3-bed. Or vice versa. Clearly one is aimed at the seriously rich and the other at a buyer with more modest means.

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What have bedrooms got to do with it?

Within a few minutes travel from here you could pay £1.5million for a 2-bed place or £60k for a 3-bed. Or vice versa. Clearly one is aimed at the seriously rich and the other at a buyer with more modest means.

What makes one posh box six times the price of another posh box 600 metres away from each other....down the road and around the corner......is it the name of the road? the post code? or the next-door neighbour? the school or the the parking place for all cars?......pretentiousness sells, where you live is who you are? :unsure:

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What have bedrooms got to do with it?

Within a few minutes travel from here you could pay £1.5million for a 2-bed place or £60k for a 3-bed. Or vice versa. Clearly one is aimed at the seriously rich and the other at a buyer with more modest means.

Just a reference to the 3-bed house the Halifax based their calculations on, but I absolutely take your point. I suppose it would be more accurate to say that if I wanted to buy the specific property I currently rent then my mortgage payments would be broadly the same as my current rent (according to the Halifax). The only difference would be that I'd need to take on close to a million pounds in debt. If I did this, then I would be renting off the bank rather than my current landlord because the Halifax's calculations are based on a strange weighted mix of repayment and interest-only mortgage rates.

The average monthly buying costs include mortgage payments (weighted average of repayment and interest-only mortgage payments), household maintenance, repair, minor alterations and insurance costs and income lost by funding a deposit rather than saving.

Doesn't say how much the Halifax assumed the deposit would be. I calculate that I would need a deposit of about £650,000 to buy the place I rent, based on the size of mortgage a bank would be likely to lend me. Whichever way you cook it, at least for most London renters, these Halifax numbers are just plain bonkers.

Edited by Orsino

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In the notes the adjustment for deposit income loss is based on 10% deposit for average house which is just over 15K. I think what they are saying is the renter has 15K in cash. I think it is nonsense to apply a geographic split. In London for many the deposit amount will be miles away from the £15K average so most will rent as there is no option to buy.

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Quite a number of my son's friends (aged around 30 - 32) who haven't been able to buy are now giving up on renting as well as they can no longer afford it and save for deposits, so they're going back home to their parents.

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If anyone is still wondering how Halifax can end up claiming that buying is £110/month cheaper than renting when their own figures show that the highest regional difference between buying and renting is £82/month (with most regions showing a difference far less than this) then let me give a simple example to demonstrate what's happening:

HalifaxBuyVRent0814c.gif

Here we have two regions with some individuals renting and others buying. We assume (as Halifax does) that each house is pretty much the same, and one thing that is immediately apparent is that based on these numbers, renting is cheaper than buying.

So using Halifax's methodology, how do we come to an overall comparison for the whole country? This is what they do:

In region A there are 7 renters with an average rent of £1800, and in region B there are 3 renters with a £700 average - a total of 10 renters. Therefore, using regional weighting, the average rent paid nationally is ((7 * 1800) + (3 * 700)) / 10 = £1470.

Similarly with buyers, there are 2 in region A at a £2100 average, and 8 in region B with £800 average, so the national average is ((2 * 2100) + (8 * 800)) / 10 = £1060.

The headline from Halifax based on this example: buying is £410/month cheaper than renting, or nearly £5000 a year, even though no-one buying in a particular region is paying less than a renter.

Of course the more logical way of doing this is to simply weight the average differences. We have 9 people in region A where renting is £300 less than buying, and 11 people in region B where it's £100 less to rent than buy. So the average national difference is ((9 * 300) + (11 * 100)) / 20 = £190. Headline: It's £2280 p.a. less if you rent rather than buy.

If we apply this method to the Halifax numbers in the press release (weighting by regional owner occupier and private rental housing stock data from DCLG) we get a figure of -£25, i.e. it's £300 less per year to buy rather than rent, not £1300 as the press release claims.

As you can see, the skewing of the data is caused by much higher rents in region A, where the proportion of renters is also higher. And so it is in the real world, with London biasing Halifax's national results because a much higher proportion of people rent there than elsewhere in the UK.

Oh, and I might add that Halifax conveniently omitted the 2008 result from their table, which even under their warped methodology showed that buying with a mortgage cost £324 per month more than renting.

Still, thank God for those 25-year fixes. Oh, wait...

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BBC obediently states as news a press release with cooked data from a company with a vested interest in that position.

Pretty disgusting frankly.

300 or 1300, its peanuts when you consider the unsustainable emergency measures that bring about those numbers and consider the costs a fuller picture would include.

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BBC obediently states as news a press release with cooked data from a company with a vested interest in that position.

Pretty disgusting frankly.

300 or 1300, its peanuts when you consider the unsustainable emergency measures that bring about those numbers and consider the costs a fuller picture would include.

I agree, but just to be clear, I'm not giving any credence whatsoever to the £300 figure.

The whole release is an utter abortion of statistics.

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If anyone is still wondering how Halifax can end up claiming that buying is £110/month cheaper than renting when their own figures show that the highest regional difference between buying and renting is £82/month (with most regions showing a difference far less than this) then let me give a simple example to demonstrate what's happening:

HalifaxBuyVRent0814c.gif

Here we have two regions with some individuals renting and others buying. We assume (as Halifax does) that each house is pretty much the same, and one thing that is immediately apparent is that based on these numbers, renting is cheaper than buying.

So using Halifax's methodology, how do we come to an overall comparison for the whole country? This is what they do:

In region A there are 7 renters with an average rent of £1800, and in region B there are 3 renters with a £700 average - a total of 10 renters. Therefore, using regional weighting, the average rent paid nationally is ((7 * 1800) + (3 * 700)) / 10 = £1470.

Similarly with buyers, there are 2 in region A at a £2100 average, and 8 in region B with £800 average, so the national average is ((2 * 2100) + (8 * 800)) / 10 = £1060.

The headline from Halifax based on this example: buying is £410/month cheaper than renting, or nearly £5000 a year, even though no-one buying in a particular region is paying less than a renter.

Of course the more logical way of doing this is to simply weight the average differences. We have 9 people in region A where renting is £300 less than buying, and 11 people in region B where it's £100 less to rent than buy. So the average national difference is ((9 * 300) + (11 * 100)) / 20 = £190. Headline: It's £2280 p.a. less if you rent rather than buy.

If we apply this method to the Halifax numbers in the press release (weighting by regional owner occupier and private rental housing stock data from DCLG) we get a figure of -£25, i.e. it's £300 less per year to buy rather than rent, not £1300 as the press release claims.

As you can see, the skewing of the data is caused by much higher rents in region A, where the proportion of renters is also higher. And so it is in the real world, with London biasing Halifax's national results because a much higher proportion of people rent there than elsewhere in the UK.

Oh, and I might add that Halifax conveniently omitted the 2008 result from their table, which even under their warped methodology showed that buying with a mortgage cost £324 per month more than renting.

Still, thank God for those 25-year fixes. Oh, wait...

amazing the singing pigs are crowing about their empires...

course, these guys live in the past, their figures based on what they paid 10 years ago with IO being the basis of their costs.

But what about today?...I guess IO being still available is the kicker for BTL. but they arent paying back the capital and will have to sell one day.

I think at todays prices, in London and SE particularly,the figures my never pan out in terms of the balance sheet.

Again, the real winners, in all this, are the pedlars of finance.

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