Over a 10-year period renting is cheaper than buying
Renting is typically cheaper than buying over a 10 year-period when taking into account upfront and monthly payments, lettings platform Bunk has found.
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.
This means that renting is £172,513 cheaper than owning a home over a 10-year period when it comes to the upfront and monthly costs, with the one big difference being the bricks and mortar investment secured at the end.
Tom Woolard, co-founder of Bunk, 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.
“Not only this but those that feel resigned to renting due to the high financial barrier of buying actually have a much better opportunity to save compared to those paying a mortgage.
“Whether they choose to use this for a deposit further down the road or simply to enjoy a better quality of life is up to them.”
This 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.