UK homeowners still better off than renters despite spike in interest rates

[PeanutButter]

https://www.theguardian.com/business/2023/mar/15/uk-homeowners-still-better-off-than-renters-despite-spike-in-interest-rates

 

Homeowners in the UK are nearly £500 better off a year than renters, according to new research from Halifax.

The average monthly cost of owning a three-bed home for first-time buyers is now £971, which is £42 lower than the average cost of renting an equivalent property, the mortgage lender said. Renters pay on average £1,013 each month – 4% more.

 

This equates to a saving of almost £500 a year for owners. However, the gap has narrowed since 2016, when homeowners were saving £1,567 annually.

[btd1981]

"Policies that attract landlords and are built on the principle that higher supply means lower rents would alleviate some of the pain for tenants."

That's what they're gunning for? Get in the bin 

[TenYearToGetMyMoneyBack]

I didn't see any mention of house price appreciation or depreciation. That has to be a huge factor. The BTL model only works when prices are going up. 

I'm not sure if the Owner Occupier model worked for me in the 1990s when I effectively rented my house from the building society (as my username implies there was no appreciation) but it kept a roof over my head and there wasn't much other choice back then......... although in 1990 a friend got allocating a 1 bed housing association flat because she was still living with her parents at 21. Can you imagine that happening today ?

[Former postman]

So can mortgage holders stop bleating now that they almost (but not quite) have it as bad as renters?

[andrewwk]

57 minutes ago, PeanutButter said:

https://www.theguardian.com/business/2023/mar/15/uk-homeowners-still-better-off-than-renters-despite-spike-in-interest-rates

 

Homeowners in the UK are nearly £500 better off a year than renters, according to new research from Halifax.

The average monthly cost of owning a three-bed home for first-time buyers is now £971, which is £42 lower than the average cost of renting an equivalent property, the mortgage lender said. Renters pay on average £1,013 each month – 4% more.

 

This equates to a saving of almost £500 a year for owners. However, the gap has narrowed since 2016, when homeowners were saving £1,567 annually.

I guess it should be fairly obvious that owning is a better financial decision (if you're not going in at the top of the bubble), since each month you own a slightly larger slice of the property (so a decreasing "dead money" component to your monthly outgoing). Maintenance costs reduce this "benefit" slightly, I guess, but it's still there. The issue for me is buying at the top of a totally inflated market...

 

 

[Smith]

Read this earlier and couldn't really work out what point it was making. Suspect it's based on a press release from Halifax, trying to push the message that mortgages are still cheaper than rent, with very little input from the 'journalist'.

Its various muddled arguments are pretty spurious, anyway. The average cost of people's mortgages or rent is irrelevant; what matters to the individual is what deal they can get now.

[Huggy]

7 minutes ago, andrewwk said:

I guess it should be fairly obvious that owning is a better financial decision (if you're not going in at the top of the bubble), since each month you own a slightly larger slice of the property (so a decreasing "dead money" component to your monthly outgoing). Maintenance costs reduce this "benefit" slightly, I guess, but it's still there. The issue for me is buying at the top of a totally inflated market...

 

 

The problem for many is that it has been the 'top of the bubble' for almost 20 years. Easy to review in hindsight, but I'll put forward anyone making the buy decision in 2021 and those making it in 2004 were both doing the exact same decision, all other things being equal.

All that's really different is the latter got lucky, the former look like they'll be rinsed...

[Sackboii]

Does it include property maintenance cost ? i.e. such costs when things go wrong that would usually be covered by a landlord ?
 

£500 a year can easily be consumed maintaining your own property.

[Martin_JD]

Renting is dead money, you're just paying someone elses mortage off for them.

[nightowl]

A lot of homeowners will have bought decades ago so their monthly payments will be as little as £100pcm which brings the average down.

What matters more is people who have bought in the last decade vs renters.

[Unmoderated]

5 minutes ago, Sackboii said:

Does it include property maintenance cost ? i.e. such costs when things go wrong that would usually be covered by a landlord ?
 

£500 a year can easily be consumed maintaining your own property.

......and 10% inflation erodes the real debt of my mortgage by £40K. That's really the issue imho. Currency debasement. If I had my deposit still in some ISA even the best I might get with locking it away for  year would be 4%. 

£500 a year is also easily spent on BS rental fees and moving. 

This also only considers cash flow (typical guardian piece incapable of applying balance sheet). You might pay £1k in a mortgage which is £42 less then the bloke next door renting but of that £1k payment a large chunk is paying down your debt so it's improving your balance sheet. For the tenant it's ALL expense. 

[Unmoderated]

2 minutes ago, nightowl said:

A lot of homeowners will have bought decades ago so their monthly payments will be as little as £100pcm which brings the average down.

What matters more is people who have bought in the last decade vs renters.

I bought in 2017, my mortgage is £1,050 for a three bed detached in a lovely market town in the south east. Property itself is a bit crap and needs work but overall the potential and location is excellent. I cannot rent a flat in this town for less than my mortgage!

The comparison with mortgages is disingenuous. The reality is that even if I was paying £2K a month and the tenant next door pays £1K a month I'm still financially better off as over £1K of my cashflow is going to reduce my debt. What's more important is to look at the actual expense which is the interest payment + depreciation (lol) + maintenance versus the rental cost. 

[Smith]

12 minutes ago, Martin_JD said:

Renting is dead money, you're just paying someone elses mortage off for them.

Or not quite covering it, in the case of an increasing number of BTL landlords.

[rantnrave]

14 minutes ago, Martin_JD said:

Renting is dead money, you're just paying someone elses mortage off for them.

Thanks for that insight.

Of course, interest payments on mortgages are returned to you once the loan has been paid off.

[winkie]

20 minutes ago, Sackboii said:

Does it include property maintenance cost ? i.e. such costs when things go wrong that would usually be covered by a landlord ?
 

£500 a year can easily be consumed maintaining your own property.

It can but just as easily can't or doesn't..........depends what you can do for yourself and how much want to do.

I would say generally over time home buyers or owners save much more than £500 a year......once owners can save thousands a year.

[Locke]

19 minutes ago, Martin_JD said:

Renting is dead money, you're just paying someone elses mortage off for them.

We were renting, which made it very easy to up sticks and buy a house to live with my mum. If we had had to sell a place, it would have cost us much more and been a huge hassle.

If we had to move now we would have to sell and I think I would rather jump out the second floor window tbh.

[Huggy]

8 minutes ago, rantnrave said:

Thanks for that insight.

Of course, interest payments on mortgages are returned to you once the loan has been paid off.

And maintenance costs, capital losses, stamp duty....

[rantnrave]

3 minutes ago, Huggy said:

And maintenance costs, capital losses, stamp duty....

Quite.

I made a significant career advance when I offered to take a role in another company in a totally different part of the country in four weeks' time. That was a manic month, but only possible because I was renting.

[winkie]

11 minutes ago, Locke said:

We were renting, which made it very easy to up sticks and buy a house to live with my mum. If we had had to sell a place, it would have cost us much more and been a huge hassle.

If we had to move now we would have to sell and I think I would rather jump out the second floor window tbh.

Can't stand the heat, stay out of the kitchen.......just living is a hassle, doesn't get any easier, nobody can avoid it......there is no easy life, the older the harder.

Many would like to move but the thought of it is just too much, so they don't........ sometimes it would be much better long-term for them if they did.......no pain no gain.

[PeanutButter]

So we’re pro-renting now? 

And who do you rent from?

 

[henry the king]

2 hours ago, PeanutButter said:

https://www.theguardian.com/business/2023/mar/15/uk-homeowners-still-better-off-than-renters-despite-spike-in-interest-rates

 

Homeowners in the UK are nearly £500 better off a year than renters, according to new research from Halifax.

The average monthly cost of owning a three-bed home for first-time buyers is now £971, which is £42 lower than the average cost of renting an equivalent property, the mortgage lender said. Renters pay on average £1,013 each month – 4% more.

 

This equates to a saving of almost £500 a year for owners. However, the gap has narrowed since 2016, when homeowners were saving £1,567 annually.

Is that just a mortgage cost? Because surely their "research" wouldn't ignore things like building insurance, repairs, and so on.

[henry the king]

52 minutes ago, Sackboii said:

Does it include property maintenance cost ? i.e. such costs when things go wrong that would usually be covered by a landlord ?
 

£500 a year can easily be consumed maintaining your own property.

Way more than £500/year on maintenance of a 3 bed house. Way way way way more. And building insurance too. 

[winkie]

4 minutes ago, PeanutButter said:

So we’re pro-renting now? 

And who do you rent from?

 

Never rented or never rented anything out apart from a tax efficient bedroom to help with the cost of living......win,win.

People will just have to be creative, there are more ways to skin a cat.......not just three ways of providing a roof over your head..... buying, private or social/housing association renting.

 

[Sackboii]

9 minutes ago, henry the king said:

Way more than £500/year on maintenance of a 3 bed house. Way way way way more. And building insurance too. 

Exactly. So the headline in the article is ball-ox.

[ChrisSussex]

There are alot of other costs involved in owning a house such a remortgage fees, insurance, legal fees and maintenance. You are probably better off owning than renting since most rental properties are slums.