Tonester Posted August 31, 2007 Share Posted August 31, 2007 If you take the rent of a place and the mortgage of the same (or similar) place, taken at 6% interest only then what is the difference in your area? Before the latest stint of rate increases I noted that in Cambridge rent was similar price to mortgages. However, since then with 6% a realistic rate (one without ridiculous application and redemption fees) it has clearly become cheaper to rent than buy. What about in your area? In Cambridge for higher end properties I've seen a £350,000 house have a £1100 rent, but the mortgage payments would be £1750, so the ratio is 1750/1100 = 59%. For a lower end house selling at £185,000 the mortgage would be £925 and the rent £750, so the ratio 23%. The spread is quite wide but showing that renting is cheaper. Has anyone a chart showing renting increases v house price increases? I remember one being on here a year or so ago which showed the rent line almost being the trend of the house price line, but with the house price line currently above the rent line (hence over-valuation). Quote Link to comment Share on other sites More sharing options...
CynicAl Posted August 31, 2007 Share Posted August 31, 2007 About 23% in Fife, but that would not take into account savings on buildings insurance and life assurance. Add that in and it comes to about 30%. Even right at the bottom of the market interest only is only just comporable to rent. S'funny, I was renting 10 years ago and was paying the same then as I do now and I have a better place to live now. Quote Link to comment Share on other sites More sharing options...
dude wheres my house Posted August 31, 2007 Share Posted August 31, 2007 50 ish i reckon Quote Link to comment Share on other sites More sharing options...
R K Posted August 31, 2007 Share Posted August 31, 2007 If you take the rent of a place and the mortgage of the same (or similar) place, taken at 6% interest only then what is the difference in your area? Before the latest stint of rate increases I noted that in Cambridge rent was similar price to mortgages. However, since then with 6% a realistic rate (one without ridiculous application and redemption fees) it has clearly become cheaper to rent than buy. What about in your area?In Cambridge for higher end properties I've seen a £350,000 house have a £1100 rent, but the mortgage payments would be £1750, so the ratio is 1750/1100 = 59%. For a lower end house selling at £185,000 the mortgage would be £925 and the rent £750, so the ratio 23%. The spread is quite wide but showing that renting is cheaper. Has anyone a chart showing renting increases v house price increases? I remember one being on here a year or so ago which showed the rent line almost being the trend of the house price line, but with the house price line currently above the rent line (hence over-valuation). Don't you mean a ratio of mtge payment to rent of 1.59? Or do you mean a rent to mtge % of 1100/1750 = 63%? Bit confused by your terminology although understand what youre getting at. Using an interest only loan of 6% seems a bit ambitous as well. Repayments on a repayment or including an investment vehicle would bump that up considerably. In my case £285k flat, rental of £750 pm. (landlord paying £120 p.m. serivce charges) puts my rental "yield" at 2.65% remarkably. South Manchester. Long live BTL! Quote Link to comment Share on other sites More sharing options...
REP013 Posted August 31, 2007 Share Posted August 31, 2007 For the property I'm in Rent pays 60% of IO and 48% of repayment on a conservative valuation. Quote Link to comment Share on other sites More sharing options...
Tonester Posted August 31, 2007 Author Share Posted August 31, 2007 Don't you mean a ratio of mtge payment to rent of 1.59? Yes, sorry for incorrect use of ratio. I mean 1750/1100 has mortgage as 59% higher than renting. Using an interest only loan of 6% seems a bit ambitous as well. Repayments on a repayment or including an investment vehicle would bump that up considerably. I think it's a fairer comparison because that stops people saying 'but you're paying off the capital' as well. I suppose if you are getting interest on money that isn't held in a mortgage then that is adding capital too. In my case £285k flat, rental of £750 pm. (landlord paying £120 p.m. serivce charges) puts my rental "yield" at 2.65% remarkably. South Manchester. Long live BTL! So 106% then! Quote Link to comment Share on other sites More sharing options...
Benedict Posted August 31, 2007 Share Posted August 31, 2007 Using an interest only loan of 6% seems a bit ambitous as well. Repayments on a repayment or including an investment vehicle would bump that up considerably. It's a rubbish comparison otherwise. If anything it should skew in favour of the mortgage route because it gives people a tax free savings vehicle unlike a renter investing excess cash. Quote Link to comment Share on other sites More sharing options...
Van Posted August 31, 2007 Share Posted August 31, 2007 http://www.londonpropertywatch.co.uk/avera...ntal_yield.html 3% & 4% not uncommon in some areas. Scary! Quote Link to comment Share on other sites More sharing options...
Smell the Fear Posted August 31, 2007 Share Posted August 31, 2007 Don't you mean a ratio of mtge payment to rent of 1.59?Or do you mean a rent to mtge % of 1100/1750 = 63%? Bit confused by your terminology although understand what youre getting at. Using an interest only loan of 6% seems a bit ambitous as well. Repayments on a repayment or including an investment vehicle would bump that up considerably. In my case £285k flat, rental of £750 pm. (landlord paying £120 p.m. serivce charges) puts my rental "yield" at 2.65% remarkably. South Manchester. Long live BTL! Indeed, his calcs are utter ******. For my flat in SW London IO mortgage is 1.6 times rent. Although only 18 months ago this would have been 1.1. London really has gone ballistic recently. Quote Link to comment Share on other sites More sharing options...
Balloonist Posted August 31, 2007 Share Posted August 31, 2007 (edited) http://www.londonpropertywatch.co.uk/avera...ntal_yield.html3% & 4% not uncommon in some areas. Scary! 3.3% for a 1 bedroom flat in my area according to that site. It does have this place (and other expensive properties) listed as a 1 bed though, so I question its accuracy. http://www.hamptons.co.uk/index.asp?showpa...RefNo=RIC070063 Edited August 31, 2007 by jon211 Quote Link to comment Share on other sites More sharing options...
Guest Shedfish Posted August 31, 2007 Share Posted August 31, 2007 round here rent per month is about 60% of a repayment mortgage Quote Link to comment Share on other sites More sharing options...
EmpiricalBear Posted August 31, 2007 Share Posted August 31, 2007 Currently my rent pays somewhere between 43-51% of IO mortgage... however it might be even be lower than that judged by some achieved prices. Of course, as a %age of repayment the difference would be much greater. (Cant' be bothered calculating it) The interesting point to me is that now, long term renting here is probably more cost effective than buying if one uses the calculators. In any case, I can't earn enough to buy here. So actually it makes sense to rent. Maybe STR's like me who cashed out in 03/04 will be better off renting long term now. Quote Link to comment Share on other sites More sharing options...
EmpiricalBear Posted August 31, 2007 Share Posted August 31, 2007 (edited) Staggeringly, it seems like even with inflation at 6% and HPI at only 1% I could still be better off buying (though not in this area) than renting... http://money.uk.msn.com/mortgages/calculat...calculator.aspx Looks like I'll be buying if subprime proves to be the final trigger that didn't Edited August 31, 2007 by 2MeterBear Quote Link to comment Share on other sites More sharing options...
silver surfer Posted August 31, 2007 Share Posted August 31, 2007 In my area of south west London (Kew/Richmond) yields are about 3.5-4.0%, that's based on my own renting experience which runs from a two bedroom new build flat to a three bedroom Georgian house. There's certainly no evidence of rents creeping up, indeed there's a glut of rental property available. Quote Link to comment Share on other sites More sharing options...
chichi Posted August 31, 2007 Share Posted August 31, 2007 Rent on private is 600 a month with mortgage of about 120k. However one house has been empty for over 6 months £525 month wanted - same landlord company has had to refurnish 2 properties (2 sets of flats) just round the corner at least twice in the last year and a bit. Another smaller house is empty at 450 a month - not sure how much that went for but prob 100k. Don't know what the % are Quote Link to comment Share on other sites More sharing options...
Tonester Posted August 31, 2007 Author Share Posted August 31, 2007 Staggeringly, it seems like even with inflation at 6% and HPI at only 1% I could still be better off buying (though not in this area) than renting...http://money.uk.msn.com/mortgages/calculat...calculator.aspx Looks like I'll be buying if subprime proves to be the final trigger that didn't An there-in lies the key. If house prices are static then the price of maintaining a mortgage doesn't make sense. From these posts we are seeing the price of mortgages being on average 50-60% higher than rents. This may be hundreds of pounds difference a month but if prices are going up 1% a month then that's in the thousands. When prices stabilise people will realise and probably overreact in the other way i.e. "it may be cheaper to buy now but why buy when prices are falling 1000s a month." Quote Link to comment Share on other sites More sharing options...
silver surfer Posted August 31, 2007 Share Posted August 31, 2007 An there-in lies the key. If house prices are static then the price of maintaining a mortgage doesn't make sense. From these posts we are seeing the price of mortgages being on average 50-60% higher than rents. This may be hundreds of pounds difference a month but if prices are going up 1% a month then that's in the thousands. When prices stabilise people will realise and probably overreact in the other way i.e. "it may be cheaper to buy now but why buy when prices are falling 1000s a month." You got it, and with 940,000 current BTL mortgages in the UK (plus all the liar loans where landlords have mewed their own property to buy a BTL) that's an awfully big body of water when the dam breaks. Quote Link to comment Share on other sites More sharing options...
Chris_86 Posted August 31, 2007 Share Posted August 31, 2007 Town where i live (Northumberland). £400~£450 per month for 2 bed flats worth (asking anyways) £90k~£100k. The higher up the ladder the better the rental options look. Couple nice 2 bed semi’s on at £495 per month worth £135K ish. £900 month get you a big new build 4 bed detached with double garage etc, typically asking £300K. Quote Link to comment Share on other sites More sharing options...
ScaredEitherWay Posted August 31, 2007 Share Posted August 31, 2007 £350 for a studio flatlet, "worth" £75k - yield of 5.6% The calculator said I'd be better off buying than renting - even over a year. Up the ladder a bit, it's a different matter though I think. Quote Link to comment Share on other sites More sharing options...
bugged bunny Posted August 31, 2007 Share Posted August 31, 2007 Bristol 1 bed flats: cheap to mid-range areas: about £130,000 to buy, £550 p.c.m. to rent. Rent pays ~85% of an IO mortgage. expensive areas: about £175,000 to buy, £625 p.c.m. to rent. Rent pays ~72% of an IO mortgage. Quote Link to comment Share on other sites More sharing options...
the end is a bit nigher Posted August 31, 2007 Share Posted August 31, 2007 Staggeringly, it seems like even with inflation at 6% and HPI at only 1% I could still be better off buying (though not in this area) than renting...http://money.uk.msn.com/mortgages/calculat...calculator.aspx Looks like I'll be buying if subprime proves to be the final trigger that didn't part of your result is due to the gearing effect but that works both ways, i.e. your losses can accelerate what this calculator doesn't seem to cover is what happens if you invest the difference between the rental and mortgage repayments e.g. i to buy where I live would cost £300k (possibly £350k but will keep lower for this example) deposit £50k repayment over 20 years at 6% = £1791 / month put the figures into the the rent - buy calc: property inflation = 6% maintenance = £1,000 p.a. mortgage rate = 6% general inflation = 3% if i buy then the calc. says i am £446,634.49 better off than renting HOWEVER my actual rent is £750 / month - if I invest the £1,041 a month difference at 6%, then over 20 years, this works out at £480,522.53 I seem to be better off renting by over £30k If property inflation falls to 3% i.e. the same rate as general inflation then according to the calculator I am better off buying by £30,530.29 - add back the invested difference of £480,522.53 and suddenly you are £450k better off RENTING! AND - just for good measure - the calculator ASSUMES that rental cost will go up in line with house prices, which we all know it doesn't! I think this proves it all conclusively!!! Quote Link to comment Share on other sites More sharing options...
bazzer Posted September 1, 2007 Share Posted September 1, 2007 Don't you mean a ratio of mtge payment to rent of 1.59?Or do you mean a rent to mtge % of 1100/1750 = 63%? Bit confused by your terminology although understand what youre getting at. Using an interest only loan of 6% seems a bit ambitous as well. Repayments on a repayment or including an investment vehicle would bump that up considerably. In my case £285k flat, rental of £750 pm. (landlord paying £120 p.m. serivce charges) puts my rental "yield" at 2.65% remarkably. South Manchester. Long live BTL! Ahhh the crazy prices of South Manc, not in Chorlton are you by any chance! Either that or Didsbury I assume... I'm paying 595 for mine (chorlton), and valued at 155kish I think. I reckon I'm gonna get kicked out at the end of this year... I know when they bought the flat, I know how much for, just not sure how long the mortgage was fixed for. I'm not covering their mortgage, so I assume they are in for capital, I also don't think they are stupid so I expcet to be given notice fairly shortly... Quote Link to comment Share on other sites More sharing options...
the end is a bit nigher Posted September 1, 2007 Share Posted September 1, 2007 part of your result is due to the gearing effect but that works both ways, i.e. your losses can acceleratewhat this calculator doesn't seem to cover is what happens if you invest the difference between the rental and mortgage repayments e.g. i to buy where I live would cost £300k (possibly £350k but will keep lower for this example) deposit £50k repayment over 20 years at 6% = £1791 / month put the figures into the the rent - buy calc: property inflation = 6% maintenance = £1,000 p.a. mortgage rate = 6% general inflation = 3% if i buy then the calc. says i am £446,634.49 better off than renting HOWEVER my actual rent is £750 / month - if I invest the £1,041 a month difference at 6%, then over 20 years, this works out at £480,522.53 I seem to be better off renting by over £30k If property inflation falls to 3% i.e. the same rate as general inflation then according to the calculator I am better off buying by £30,530.29 - add back the invested difference of £480,522.53 and suddenly you are £450k better off RENTING! AND - just for good measure - the calculator ASSUMES that rental cost will go up in line with house prices, which we all know it doesn't! I think this proves it all conclusively!!! apologies for bumping my own post, but given the figures within it, i'm surprised there hasn't been any comments, if only from the bulls to tell me i'm talking crap the figures seem to indicate that at current prices, without further hpi, then buying really is dead money Quote Link to comment Share on other sites More sharing options...
Breezy Posted September 1, 2007 Share Posted September 1, 2007 If you take the rent of a place and the mortgage of the same (or similar) place, taken at 6% interest only then what is the difference in your area? Before the latest stint of rate increases I noted that in Cambridge rent was similar price to mortgages. However, since then with 6% a realistic rate (one without ridiculous application and redemption fees) it has clearly become cheaper to rent than buy. What about in your area?In Cambridge for higher end properties I've seen a £350,000 house have a £1100 rent, but the mortgage payments would be £1750, so the ratio is 1750/1100 = 59%. For a lower end house selling at £185,000 the mortgage would be £925 and the rent £750, so the ratio 23%. The spread is quite wide but showing that renting is cheaper. Has anyone a chart showing renting increases v house price increases? I remember one being on here a year or so ago which showed the rent line almost being the trend of the house price line, but with the house price line currently above the rent line (hence over-valuation). We rent a lovely rural cottage in the green belt in Kent for 800pcm. The property value is £360,000, this would be £2346.80pcm (repayment) or £1800pcm (IO) at 6% . Therefore happy renting at moment. Quote Link to comment Share on other sites More sharing options...
AC2 Posted September 1, 2007 Share Posted September 1, 2007 To 'the end is nigh': "my actual rent is £750 / month - if I invest the £1,041 a month difference at 6%, then over 20 years, this works out at £480,522.53" Depending on where you stash this money you would be paying tax on some of the interest. Over 20 years that makes a big (negative) difference. Ultimately, with any investment, what matters is what you have left after tax and inflation. Back on topic, rental here in Brighton & Hove is £1,000pcm on a flat worth roughly £330k, i.e. rent is 61% of an I/O mortgage. Quote Link to comment Share on other sites More sharing options...
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