Buying vs Renting: Expert Verdict on Cost Efficiency

Paying for a place to live each month is undeniably the most substantial bill that most of us have to foot. Renting, which offers flexibility and removes certain responsibilities like maintenance from tenants, is often seen as an attractive option, especially for those not wishing to be tied down in one location. 
 
However, renting can also come with its own limitations, like restrictions on aesthetic changes and pet ownership. Moreover, fluctuating economic conditions also influence whether renting or buying becomes a more cost-effective choice. 
 
Currently, experts suggest it's harder than ever before to step onto the property ladder due to various factors influencing mortgage prices, including interest rates. After over ten years at rock bottom levels, the Bank of England began raising rates in 2021, peaking at 5.25% last year. 
 
Despite recent cuts bringing them down to 5%, these are still considered high by recent standards, consequently pushing up mortgage costs and making home ownership far pricier than it was just a few years ago. 
 
In comparison, rental prices are primarily driven by demand rather than landlord’s mortgage costs. Greater demand allows landlords greater room for price hikes, while low demand makes this difficult. 
 
The financial crash of 2009 led to stricter rules surrounding mortgages, thereby making it even tougher for potential buyers—another factor contributing towards increased rental demands and subsequently higher rent bills. 
 
Recent data from Rightmove suggests that average monthly mortgages amounting to £1,109 now surpass average rents costing £1,316 per month, indicating that owning might be cheaper than renting currently. 
  
Experts agree with this notion too; Ben Perks (Orchard Financial Advisers) states, "Renting is expensive and doesn't give people long-term security...it often works out cheaper month on month to buy a property." Similarly, Elliott Culley (Switch Mortgage Finance) adds, "Most first-time buyers I deal with end up paying less per month on a mortgage compared to their previous rent.”. 
 
Yet, the cost of owning versus renting is not uniform across the country and greatly depends on local supply-demand dynamics. For example, despite London's high property prices, it might still be more affordable to buy than rent due to exorbitantly high rents. 
 
Halifax analysis conducted earlier this year pointed out that monthly costs for first-time homeowners were higher than equivalent rental costs in nine out of 12 UK regions last year. Only the South West, London, and Scotland showed contrary results where buying was cheaper. 
 
The type of property also plays a crucial role in determining whether buying or renting would be more economical. 
 
However, Simon Bridgland (Release Freedom) advises, "Location will make all the difference...but deposits aside, buying your own home is still the cheaper option." 
 
Beyond current costs, comparisons between renting and owning should also consider long-term implications. Over time, mortgage costs decline as you pay off more of your loans, whereas rental bills are likely to increase annually with landlords raising prices. Furthermore, while mortgage payments contribute towards eventual ownership of a house, rents only help pay off someone else’s mortgage, leaving tenants without any asset at the end of the agreement term. 
 
Kim Kinnaird (mortgages director, Halifax) summarizes this point aptly: "We know home ownership can offer long-term financial and living stability. That's why we believe it's an important step to take."