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Buying is Cheaper than Renting

Thursday, 1st November 2012

Categories: Sales Lettings

Author: Peter Barry

As rental prices continue on a steady upwards trajectory, it still remains cheaper to become a homeowner in London than it is to be a tenant. In fact, according to recent research conducted by the Halifax, the cost of buying a home in the UK is now almost a fifth lower than renting, and London offers the best comparative savings for homeowners.

This is sadly ironic, considering that many people who are keen to buy a home and take their first tentative step on the property ladder still can’t quite reach up to that first rung. They remain renters far longer than they’d like, as they simply can’t afford to pull together the substantial deposit required by cautious banks dealing with mortgage applications in a recession.

Serial renters must simply sit and watch as rents rise, leaving them with a diminishing disposable income to set aside for savings. However, if those in the rental market can see their way to saving up the required deposit for a property, they will be safe in the knowledge that, not only will they be saving money monthly on the mortgage for an equivalent property, but they will also benefit from any natural house price rise, or any value they can add to the property.

This vicious cycle is undoubtedly fuelling the continued rise in rents, as more people are entering – or remaining in – the rental market, pushing up demand and pushing up prices. However, with mortgages now looking more appealing and easier to come by, it makes sense for savvy savers to make the extra effort to scrape together a decent deposit and reap the long-term financial rewards. Although house prices have risen exponentially compared to entry-level wages, it’s still possible to get a decent pad on a decent wage. Buying with friends or relatives, renting out spare rooms, or tapping parents for an advance on an inheritance are ways in which first-time buyers are getting around the huge hurdle of saving independently for a 10 or 15% deposit.

In some ways, it has never been tougher for first-time buyers to get on the ladder but the incentive is certainly greater at the moment and the prize is worth the extra effort it will take to climb on.

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