First time buyers - do they benefit more from buying over renting?
August 3, 2008
A recent report has suggested that although house prices are falling, mortgages have become more expensive, and credit conditions are tighter than ever, many first time buyers could still be better off purchasing a property rather than renting a home. Many first time buyers have been put off purchasing a property because of the high cost of borrowing and difficulties in getting finance, and many have had to turn to renting instead.
The report showed that in some parts of the UK some first time buyers could save many thousands of pounds over the long term compared to someone that decides to rent instead, although this did not apply in all areas. In some areas the first time buyers could actually end up much worse off than those that decide to rent, so the benefits of buying compared to renting will be dependant on area amongst other things.
The strong demand for rental properties has seen the number of buy to let mortgages rise over the past two year, and around 10% of the mortgage market is now made up of buy to let loans. One official said that those renting were better off in one respect, because they did not have to worry about remortgaging, carrying out repairs on the property, and other issues that often face homeowners, including the risk of repossession or negative equity.
One official said: “They don’t have to remortgage, won’t suffer equity losses and their expenditure on basic commodities is lower too.” First time buyers have been hard hit by the effects of the global credit crunch, with lenders really tightening up on their lending criteria, and with many being unable to take out a mortgage because of the huge deposits that most lenders are now demanding.
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