01 Sep 2022
The Difference Between Renting and Buying
With the costs of both renting and buying a home reaching equally increasing heights, you may wonder which is better for you. Have things changed due to these increasing prices?
There continue to be pros and cons to both, so let’s explore them…
According to Rightmove’s house price index, as of July 2022, the average asking price of a house reached a record high of £369,968. House prices commonly drop in August and this year is no different, with a 1.3% drop to an average asking price of £365,173. This is still up 8.2% from the same time last year though.
The percentage of this drop is similar to other August drops from the past decade. Prices usually fall in August due to things like summer holidays and people wanting to sell up and move before Christmas. Some will price competitively to attract a buyer quickly, as the process can take weeks to months.
Whether prices will continue to drop past this remains to be seen, things may slow down at the very least. The cost of living crisis could eventually affect the housing market by way of people downsizing, creating a larger supply of property and therefore lower prices.
According to HomeLet’s rental index for July 2022, the average rental price for a new tenancy in the UK is estimated to be around £1,127 per month. If you exclude London, the average is £948 per month. This is the highest rate on record.
This average price is an increase of 9.5% from July of last year and 1.3% up from June 2022. London is particularly extreme with an annual growth of 13.6% making the average rental price £1,868 per month.
The Pros of Renting
Renting is a much quicker process with more flexibility. It’s ideal as a temporary measure, being better for someone who is likely to move around a lot due to work or lifestyle.
Those in a relationship may want to try renting first in order to save money together before they make the big commitment of purchasing a home. It could be a way to test the relationship, renting is also much easier to deal with if a relationship breaks down.
With renting you don’t pay maintenance costs, so if anything breaks down or you experience a problem with your plumbing, heating, boiler, etc. – your landlord will cover it.
Some rental places are furnished or at least part furnished, meaning you won’t need to buy your own sofa, bed, fridge or washing machine.
You’ll only have to worry about payments monthly, you won’t have an entire mortgage commitment hanging over your head.
Downsides to Renting a Property
The money you pay won’t be going towards anything in the future like it would if you were paying off a mortgage towards fully owning a property. Some people see this as throwing money away compared to the investment you make when you buy.
You also have little control over a rental property, so you won’t be able to redecorate unless you get approval. Whilst you won’t have to pay for maintenance, repairs may take longer than you want as the landlord will be in charge of organising them.
Your landlord may increase the rent or sell the property, meaning your life could suddenly change. If the landlord does sell the property, you’ll have to quickly find somewhere else to live.
You will have to save up for a deposit worth at least a month’s rent or more, it’s also not uncommon for some renters to end up having to dispute with the landlord in order to get their full deposit back after moving.
Advantages of Buying
With buying, you have a lot more security. There is no risk of sudden upheaval from something such as a landlord kicking you out like there is with renting.
You also have a lot more freedom to do what you want with a home. You can decorate it how you like without having to ask for permission from a landlord. You can also arrange repair work for any time you like, perhaps getting it done quicker than you would if you were renting. You’ll also be free to upgrade things like the bathroom and anything else that needs an update.
If prices increase after buying, you could stand to profit if you eventually decide on selling up and moving.
Mortgage payments can often be lower than rent, plus once you pay off the mortgage, you’ll own your own home fully. Rent is something you pay forever.
Disadvantages of Buying a Property
Saving up for a deposit is difficult and can take a long time, especially with rising prices. You’ll also need to pay for any maintenance or repairs yourself, so whilst buying is an investment, it also requires more money to sink into that investment.
Unlike renting, you can’t just move quickly. Houses can take a while to sell and you are at the mercy of market values falling or rising.
Renting Vs Buying
High rent costs also mean that saving up to buy a house whilst renting is difficult and may leave some people stuck renting long term instead. This is especially the case if there is just one person earning an income.
Home ownership is thought to be generally superior and given the choice between the two, buying is the one most would aim for. It ultimately depends on your circumstances.
There are a number of schemes running currently with the purpose of helping first time buyers get on the property ladder, so consider exploring these options. Shared ownership is one such scheme that gives you a taste of both buying and renting in one, read more about it here.
What If I Want to Rent Out My Property?
While the case for buying is strong, there are circumstances where renting suits a person better. Both options will always be available, so if you’re thinking of investing in property you can get an idea of what a buy to let mortgage will cost you by filling out our form.
Want to Buy? Get Started with a Mortgage Advisor
If you’re interested in buying, you can contact us for expert mortgage advice by phoning 03300 58 60 58 or emailing us at firstname.lastname@example.org. You can also get started straight away with our online form here.