Which is cheaper – renting or buying a home?
Buying a property isn't accessible to everyone, but how much does renting really cost?
Renting is £172,513 cheaper than owning a home over a 10-year period based on upfront and monthly costs alone, according to Bunk.
The lettings platform found that, across the UK, the average monthly rent is £676. With the newly introduced five-week cap, that means a rental deposit costs an average of £845 and renting at this average monthly rate over a 10-year period would cost a total £81,120 – a total cost of £81,965 when including the deposit.
The current average UK house price is £226,798 and so a 10% deposit would set you back £22,680. This leaves a loan amount of £204,118 and, at a 10-year fixed rate of 2.58%, would mean a total repayment of £231,798, a total of £254,478 including the deposit.
And this is where the £172,513 saving comes from.
Of course, the firm admitted that there’s one big difference with buying, because you will hopefully amass equity in your asset and ultimately own it outright, unlike with renting which is an expense rather than an investment.
The cost saving is most notable in Cambridge with a difference of £341,090 over 10-years between renting and buying, with the saving in London also topping £316,247.
In Bournemouth, renting over 10-years is £183,376 cheaper than buying, with Bristol (£177,613), Edinburgh (£166,547), Cardiff (£143,984), Southampton (£138,617), Portsmouth (£137,240) and Plymouth (£128,480) all home to some of the biggest savings.
The lowest saving is in Glasgow where renting for 10-years is just £43,145 cheaper than buying in the city.
Co-founder of Bunk, Tom Woolard, said: “Of course the big difference between renting and buying is that one leaves you with a sizable financial asset as a reward for your years of hard work making mortgage payments.
“However, more and more of us are opting to rent long-term and what we wanted to highlight is that while the rental market is generally viewed in a negative light due to high rental costs, it is actually a considerably cheaper option when compared to homeownership, even with almost record low-interest rates.”
Article by Christina Hoghton for www.yourmortgage.co.uk