Tuesday, September 11, 2012

Fun With Numbers

Buying cheaper than renting in 9 out of 10 towns

The cost of servicing an interest-only mortgage is lower than the cost of renting the equivalent property in 44 of the 50 largest towns and cities across Britain, latest research from property website Zoopla.co.uk reveals... Lawrence Hall of Zoopla.co.uk, said: “Whilst buying is clearly the better option than renting at the moment based on our research, the difficulty in saving for a deposit and the tight lending conditions are preventing huge swathes of would-be buyers from taking advantage of the current lower cost of owning a home. And with more potential buyers being forced into the rental market, rents are rising based on the higher demand.”

Posted by mark wadsworth @ 10:41 AM (1995 views)
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12 thoughts on “Fun With Numbers

  • and subsidised living with your mum and dad is even cheaper!

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  • general congreve says:

    This is true. One of my best mates is buying a house. I tried my best to persuade him not to just yet, but he wouldn’t be told and when I thought about it I decided I’ve had enough of kipping on his sofa when I visit, so a spare bedroom with a bed would be just the ticket. So, I gave him my blessing if that is what he really wanted to do.

    He’s got a fat BOMAD deposit and got a mortgage sorted quickly. He paid something like 230k, for a three-bedroom house. Even though he could afford a repayment mortgage he has gone for an interest only mortgage. It works out about 280 quid a month. His flat mate is moving in with him to lodge and will be paying 350 a month in rent. So he’s going from blowing several hundred quid a month sharing a flat with two other guys to buying a house, having one house mate, and making 70 quid every month.

    This is why there is no HPC.

    I did question him about his repayment vehicle, he reckons his pension will sort that out. He was also chuffed he got the house for 2k under asking! Deal 😮

    I haven’t commented further to him on either of these issues, as he’s my best mate and I did my best before he put an offer in. I did my best. Now I am just looking forward to a nice comfortable bed next time I go to visit for a massive p1ss up.

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  • I dipped in today after a long absence and must say the headline is bang on. After 5 years renting, and spending most days searching on here for comfort that prices were dropping we made the jump last year and bought a run down house in a very nice road and spent a huge amount of money extending and updating it. After all that we have an effectively brand new house which is bigger than the one we rented and my repayment mortgage is over £400 pcm less than I paid in rent. I know we were fortunate to have a large deposit having STR and this is not an option for many, but there were a lot of people in a similar position which may explain why over a year later this slow motion HPC still shows little sign of accelerating. The majority of the contributors here are the same as 2 years ago when I was viewing every day…nothing has changed but life moves on.

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  • What a load of bull. they are not comparing apples with apples. For a start no one can buy a flat in this country with a 100% IO mortgage.

    By my calculations, to purchase the flat they use as an example (£139k) you’d need a minimum 10% deposit so a truer comparison would be to assume a 90% repayment mortgage (over 30yrs) whcih would cost £711 pcm vs average rent of £659 pcm for the same property. You would then have to pay for ground rent, service charges, life/buildings insurance and general repair/maintenance. The renter on the other hand presuming a balanced comparison would put his deposit & fees cash (less rent deposit) that he didn’t use buying a flat (say £18k) and put it in the bank and earn some interest.

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  • GC, you did your best, if his monthly payments are £280, then presumably his BOMAD deposit is about half the purchase price?

    B, correct. Zoopla does this sort of survey regularly, they used to be a bit more realistic and take into account all the other factors you mention but now they have thrown caution to the wind.

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  • @3 Essexboy

    What do you want? A round of applause?

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  • A “conservative” assumption of 5%. LMFHO.
    Oh, and we mustn’t mention the all-important role of a large deposit (Averaging £35,000 and its financial implication) for the purpose of a fair comparison with those renting losers.

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  • 3. Essexboy

    Well done. At least you and others here in the past have saved the trouble of being here in 5/10 years time when inflation would have caught up with past fantasies.

    I have always been the first to congratulate those wise or desparate enough to have thrown in the towel and Moved On, now is certainly no different.

    Ultimately when our light cords are pulled and all is said and done, does it really matter?
    …..THY WILL BE DONE ON EARTH AS IT IS IN HEAVEN. That’s the HPC i’m now waiting for.

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  • Essexboy, fair enough. But I’m going to stick it out for another two years before I roll over and give in.

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  • @6 Dill
    Thanks for your constructive comment. I, like GC, was just giving a real world example based on personal experience rather than just meaningless conjecture to try to explain why this headline is in many cases true. I am sorry if it is not what you wanted to hear. I’m not looking for a round of applause but clearly you’ve got a pint of bitter.

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  • We quickly reached this conclusion at the end of the mini crash in 2008. We STR in 2007, had a six figure deposit. We were renting a small 3 bed newbuild for £800 pcm. We bought a newbuild smaller 5 bed in 2009, £230k, in the SE.

    Our offset tracker mortgage payments are £700 pcm, the interest element included in this is £220! Our house type rents on the other side of the estate for £1100 to £1300 pcm.

    We did switch to i/o during a period of my unemployment in 2010/2011. Lifesaver having rent under £250 pcm.

    So apples for apples of I/O renting vs private renting for us would be £900-£1000 pcm saving. That’s a lot of 3D 47″ TV’s and SKY full package!

    M

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  • essexboy

    If it suits to you to buy, that’s fine. There is an argument to made in favour, but also one against, notwithstanding the glacial pace of house price falls. If I lived in a different part of the country I would probably buy. One has to take into account not only the possibility of significant price drops, but also one’s personal circumstances. For some people it still makes good sense to rent, although the future of prices is one we still puzzle over.

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