Should I Buy or Continue to Rent

Rents reached another record high in September 2022, making it harder for tenants to build up enough savings for a deposit to buy their own home.

However, renting is usually quicker, cheaper and offers more flexibility than buying. In reality, there are pros and cons to both and which is best will depend on your personal circumstances and priorities.

In this article, we outline:

Renting a home: advantages and disadvantages
Buying a home: advantages and disadvantages
Whether financially it is better to rent or buy
How long it takes to save for a house deposit
Whether it is worth buying a house – questions you should ask yourself
Whether renting really is a waste of money
What other costs are involved with renting a house

Related content: Tenants' rights explained: deposits, fees, insurance & more

The rent vs buy debate

Whether you should rent or buy is an old-age debate that feels particularly loaded at the moment. Many people cannot afford to get on the property ladder so do not have a choice between the two.

Over the past 20 years the price of housing has increased at a rate that outstrips wage growth. The proportion of people aged between 25 and 34 who own a house was 55% in 1997 and is now closer to 34%, according to the Institute for Fiscal Studies.

Meanwhile, rental prices are also shooting up, meaning tenants have less disposable income to set aside to build a deposit so they can buy a home.

For some people, buying a home might feel out of reach. You might want to read our guide for first-time buyers which outlines the steps and the government schemes you could use.

If you're in a fortunate position to be weighing up your options, we outline the upsides and downsides of renting and buying.

You might want to read: Is now a good time to buy a house?

Renting a home

Advantages to renting a home

A tenancy can be just six months and you can move after this time if it doesn't work for you.
Being able to give notice to vacate gives you flexibility to move to a different type of property or to a different area.
Moving out of a rented home can often be quicker than selling a property, which is useful in case a relationship breaks down. Renting can also be a handy way to test a new relationship.
You don't have to worry about maintenance costs, meaning you are not responsible for the likes of a broken boiler.
If you rent a furnished place, the furniture and white goods are thrown in too.
Getting on the rental ladder is substantially easier, quicker and cheaper than buying a property.
You don't have to pay mortgage or legal fees and stamp duty.
You don't have to worry about house price movements.
Landlords and letting agents can no longer charge admin fees thanks to a law introduced in 2019 (we explain more on this in our guide for tenants).

Disadvantages to renting a home

Big upfront costs to pay when you move house, which can include a deposit and your first month's rent.
Your landlord might decide to increase your monthly rent when your lease is up for renewal.
No control over organising maintenance of your home so repairs can take longer than you would like.
Could have to move if your landlord decides to sell the property, which means you suddenly have to uproot your life and find somewhere else to live.
Renters sometimes find themselves battling with the landlord to get their full deposit back.
You are paying rent to your landlord, unlike your monthly mortgage payment which goes towards owning your own home.
You can't redecorate without the approval of your landlord.

Buying a home

Advantages of owning a house

In the long run you will have the security of a home without the risk of a landlord booting you out.
You can decorate your home without asking permission from anyone.
You have control over organising repair works which might be done quicker than if you were renting.
Interest rates on mortgages are still historically low, though they have increased in recent months.
Once you have paid off your mortgage, you will own an entire home.
While you should think of it as a home rather than an investment, if property prices increase then you will benefit when it comes to selling it.

Disadvantages of owning a house

Saving for a deposit is hard work and takes a long time, particularly as house prices are rising which makes it more expensive.
You have to pay mortgage and legal fees and might have to fork out on stamp duty too.
If repairs need doing, you have to foot the bill.
Homeowners are subject to the housing market and price movements. If the value of your home drops below the mortgage you secured on it, yo will be in negative equity. Unless you have savings you can use to plug the difference between the value of your home and the mortgage, it will be tricky to remortgage or sell the property.
Even if house prices don't head south, the market can be sluggish. It can take months to sell a property so you can't just move at a moment's notice.
Property is not as safe as houses. Historically, yes, costs of buying have gone up but this doesn't mean that will continue.
Interest rates are increasing, gradually pushing everyone's mortgage payments up too.

If you are a first time buyer, check out our guide on everything you need to know here.

A person standing on a pair of white arrows labelled buy and rent, pointing in opposite directions. — It's a well-known conundrum, but for many people renting is their only option

Is it better financially to rent or buy?

A first-time buyer will find it easier to rent a house than to buy one. This is largely because they won't have to stump up such a large deposit to rent.

In England and Wales, the deposit is capped at five weeks' rent. This rule doesn't apply in Scotland and Northern Ireland.

According to figures from the Tenancy Deposit Scheme on rental deposits:

In England and Wales the average value was £1,016 in March 2022, a fall of 1% from £1,025 in March 2021
In Scotland the average deposit is £749, up 2% over the same year
And in Northern Ireland it averages at £641, an increase of 4% in a year

The deposit needed to rent is much lower than the tens of thousands of pounds usually needed to buy a home.

However, rising rental prices are going up making it harder to save for a house deposit should you want to buy.

In September 2022, rents reached another record high to an average £1,159 per month according to the Homelet Rental Index. That's an annual increase of 9.2%.

All twelve regions saw a monthly and annual price rise.

The future doesn't look much better for renters. Analysis from the Royal Institute of Chartered Surveyors projects rents to grow more quickly than house prices over the next five years, increasing by 5% and 4% each year respectively.

How long does it take to save for a house deposit?

It takes nearly 10 years on average for someone to build up a 15% deposit, according to estate agent Hamptons International.

It's an increasingly difficult task for many people as wages stagnate and savings rates are low.

The average property price in the UK is around £254,624, according to the Land Registry. You would need to have a £13,000 deposit for the minimum 5% deposit.

If you can save a deposit of 20% you will have more mortgage choice and be able to secure a lower interest rate on the loan.

If you decide to buy, try out the Times Money Mentor mortgage comparison tool.

Once you have secured your mortgage, make sure you remortgage when your fixed deal comes to an end.

Unless you have a fixed rate mortgage deal, your monthly payments will probably go up when the Bank of England increases interest rates.

Find mortgage deals with our best buy tool

Times Money Mentor has teamed up with Koodoo Mortgage to create a mortgage comparison tool. Use it to benchmark the deals you can get — but if you want advice, it's best to speak to a mortgage broker.

This is how the tool works:

You can search and compare mortgage deals
It only takes a couple of minutes and no personal details are required to search
Once you've got your result, speak to a mortgage broker if you need advice

Product information is provided on a non-advised basis. This means that no advice is given or implied and you are solely responsible for deciding whether the product is suitable for your needs.

Is it worth buying a house?

If you're still weighing up your options, ask yourself these questions:

Where do you see yourself in two years' time? If you want a flexible lifestyle to work in different places and travel for extended periods then it might be a good idea to wait to buy.
What makes you happy in life? Do you prize security over everything, or do you dislike being tied down?
Are you likely to inherit property later in life? If so, can home ownership wait while you put money into a pension, savings or invest?
Do you want to buy a home just because you think property prices will go up? If the answer is yes, it's probably not a good idea to buy because there are no guarantees that prices will rise.
Will you be able to afford the maintenance costs if something needs repairing?
How much disposable income would you have after paying mortgage repayments and other bills? Make sure you feel comfortable.
If not, investing or paying into a pension while renting might be the best bet idea until you have moved up the career ladder or saved a bigger deposit.
Do you know about the government schemes to help people buy properties? Make sure you know the support that's available to you which we outline here.

If you are wondering whether now is the right time to buy a house, with prices rising so quickly, check out our article here.

Is renting really a waste of money?

Some people argue that renting is a waste of money because you are effectively paying your landlord's mortgage and giving them a profit on top.

While it is true that you aren't building equity in a property, renting does have its advantages, as mentioned above.

Remember that your rent payments are giving you a roof over your head and you don't have to pay for maintenance costs either.

But it's important to make sure that you aren't paying too much rent, so it's worth checking what the going rate is among other similar properties in the area.

If you think you are being charged too much, have a conversation with your landlord to see if you can negotiate reduced rent.

What costs are involved with renting a house?

One big advantage of renting compared to buying is that you don't have to worry about legal and any fees you'll have to pay your mortgage lender.

Things have also improved for renters since 2019 when a new law came into force which prohibits landlords and letting agents from charging most tenant fees. This includes admin, referencing and tenancy renewal fees.

Landlords and letting agents also have to cap the deposit at five weeks' rent.

This has saved tenants £113 on average according to campaign group Generation Rent.

But there are still some costs you need to consider before renting:

The deposit
You will need to make sure you have the first month's instalment of rent
Don't forget any moving costs such as hiring a removal van
You might need to buy furniture and utensils for your new home too

If you're trying to save up to move out, here are some money-saving challenges you could try out.

We'd love to hear what you think about Times Money Mentor. Please contact us with any thoughts or suggestions.

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Source: https://www.thetimes.co.uk/money-mentor/article/rent-buy-which-best/