Renting vs Buying: What’s best for you?

With average house prices and rents both rising, choosing between buying and renting can be a challenge. Find out which is the best, most affordable option for you.

On 4th August 2022, the Bank of England voted to raise interest rates to 1.75%, up from 1.25%, the highest level since December 2008. Millions of homeowners will start to see their mortgage costs rise and renters are likely to come under pressure as buy-to-let landlords pass on higher borrowing costs to their tenants.

The average rent in the UK is now at £1,127, up 9.5% from this time last year and 1.3% from last month’s figure. The average rent in Wales is now at £768, up 7.7% from this time last year and 2.1% from last month’s figure. This data shows that the cost of rent is increasing every year, which is a major disadvantage for renters.

Another disadvantage of renting is that you will be making large monthly payments to your landlord rather than towards owning your own home. Your landlord could also decide to sell, meaning you have no choice but to move out. You also won’t benefit from any increase in the property value.

Renting a home does have its advantages, including flexibility, so if you need to move around for work you can quickly relocate. Renters won’t lose money if the property's price goes down and you won’t need to pay for repairs and renovations. People who rent might also be able to afford to live in a bigger home and nicer area than if they were buying.

Buying a home will initially be more expensive than renting. There are upfront costs, like mortgage fees and Stamp Duty that you need to budget for. The moving process can take a long time, particularly if you’re in a lengthy property chain. There are also financial consequences if you fall behind on repayments, like getting into debt or could even face bankruptcy or have your home repossessed.

However, there are many advantages to owning your property. One of the main ones is that your property value is likely to go up over the long term, meaning you can make profit if you decide to sell. You don’t need anyone’s permission to have pets or redecorate, and any maintenance or changes you make to your house could increase its value further.

According to the latest report from Halifax, the current average price of a home in the UK is £293,221, down 0.1% month on month, the first decrease since June 2021. Due to the cost of living crisis and higher interest rates, the property market is predicted to see a fall in house prices. This news will be a welcome amongst those who have been unable to buy a home due to booming prices in recent years.

With energy bills rising and the inflation of interest rates, you may want to consider moving to an eco-friendly new build to help save you money. New build home owners can cut their energy bills by as much as 60%Energy bills from older properties in England cost an estimated £797 per year, whereas new builds are estimated at £390 per year. New builds are also cheaper to insure than older properties. This is because they have brand-new roofs, plumbing systems and electrical work, meaning there is less risk of making a claim. For more information read our article on The potential cost savings of energy prices in a new build home.

There is no definitive answer as to whether renting or owning a home is better, it completely depends on your personal situation like your finances, lifestyle, and personal goals. If you’re financially ready to buy a property, homeownership can be a great way to get the home you want and secure your financial future. However, if you’re not yet ready to settle down or unable to fund a property purchase, renting could be the best option for you.

If you are thinking about buying a property and need mortgage advice, get in touch with your local Mortgage and Protection Adviser here: