If you've been renting up until now, you may find yourself struggling with a decision that many others are facing. In this market - is it better to buy or rent?
On one hand, as you'll probably be aware, the mortgage market also had a panic last year after the autumn mini-budget announcement, when the majority of mortgage products were pulled.
Thankfully, the market has settled again around a new equilibrium, and there are more mortgage products available to borrowers. Skipton Building Society has even come out with the UK's first no-deposit-required 100% mortgage to launch in the UK since 2008.
Last week, the Bank of England increased the base rate last week for the 12th consecutive time since November 2021. This base rate affects how affordable it is to get a mortgage and buy a house, though it's worth noting lenders will have already anticipated recent rises. This means we're unlikly to see dramatic increases in mortgage rates off the back of this.
On the other hand, it's no secret that the rental market in London is competitive. Property views in North West post codes were up over 50% in March compared to last year according to Rightmove.
At Paramount, we're seeing 75 keen enquiries per property on average since March. Our properties are available for just a week on average before getting snapped up, though some - especially our Gold Standard properties - are taken a lot quicker.
And when we look at market rents, they're 11% higher compared to last year (again on average) for new tenancies starting since March.
So all of these factors might be leaving you confused about your next move: continue to rent, or is it time to get that first mortgage?
Let's break it down with the pros and cons:
Renting
When it comes to the London market, there is a way to beat the competition and find a property that works for you, without all the stress and disappointment.
The secret? Renting off market.
An how do you get in on this? If you register with us ahead of your property search, we can help match you with properties we know will be coming to market - before they're available.
So what are the pros of renting?
1. The ability to move around. Renting gives you much more choice and flexibility over your location. You can experience different types of living styles and change who you live with fairly quickly. If your preference is variety, change, and excitement - renting can work really well for this.
2. Maintenance costs covered! If your boiler goes down, or you spot a leak, you can have these fixed at the touch of a button. There are no financial or mental responsibilities as there would be with owning. For someone living a busy lifestyle this can be a huge weight off!
3. Unlocking more locations. Often, you’ll be able to rent in an area that you wouldn’t be able to buy in. It opens up locations that otherwise would not be attainable.
4. Lower initial costs. Costs to move in and get set up are significantly less than with buying. There's no saving for a hefty deposit here – you need 5 weeks of rent for a security deposit and you’re good to go.
And the cons?
1. No capital gain. You aren’t investing into something that could improve your capital.
2. Lack of security. There is always the chance the owner will want to sell, or move back in, so you may be faced with having to move on without it being your choice.
3. Restriction on individualism. Though we are seeing this rapidly changing, not being able to make a home ‘yours’ is a common complaint we see from residents.
4. Higher monthly payments. Rental payments are often more than what you would expect to pay on a mortgage.
Buying
It's true that mortgage rates aren't what they were in 2021, when it was very cheap to borrow money (with rates below 4%), but they've come down since they spiked at the end of last year (Rightmove has a helpful article about current rates here).
And when it comes to timing, buying is such a significant life milestone and commitment that making sure it's the right time for you is more important than timing the market.
What are the pros?
1. Sense of security. If you've bought with a fixed-rate mortgage, you'll have a clear view of your monthly payments for that fixed term, which will be longer than a rental term. There's also no fear of losing a property to sale or at the discretion of another party.
2. Limit to monthly payments. Once the mortgage is paid, lets say over a 30 year period – you have no further outgoings in terms of rent/mortgage. Rental payments will continue to be due as long as you are in a tenancy.
3. Capital gains. As an investment, it’s fairly sound. Property prices increase over the long term – so you will very likely make more money than you put into the purchase. This leaves you with options for retirement, to help children and future generations or to just enjoy a better quality of life.
4. Make it your own. Ability to decorate and make a property your own is a huge plus for those wishing to put down permanent roots. Within planning restrictions, you can amend and alter to your hearts desire!
And the cons?
1. Upfront costs are higher. The upfront costs of buying are higher. On top of your downpayment, you'll also have to pay for things like searches* during the buying process, the stamp duty land tax, and solicitors fees to name a few. Moving costs are also likely to be higher.
And of course, you may have the freedom to refurbish the property to your hearts' desire, but you will also have to pay for it!
2. You are tied to one location. This impacts other life decisions like the job opportunities you’re able to explore, schooling for children etc.
3. You are liable for all costs. Need a new roof? That’s on you I’m afraid. Boiler not working on a holiday in Winter? You’ll have to make the call to pay for an expensive out of hours plumber, or to sit tight and wrap up warm! It becomes a different conversation when you’re paying for it!
4. It can be expensive to get out of. Buying a property, especially with someone else, is a big commitment and is likely to cost money to get out if things don’t go as planned. If you need to sell your property before you expected, it can be expensive if it's the wrong time in the market, and you could end up losing money.
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In summary, whether it's better to buy or rent comes down to what's important to you in your life right now. Ask yourself these questions:
What are my long-term financial goals?
Am I ready to commit to one location?
Is the area I can afford a place I am happy to commit to long-term? Does it have potential for growth?
How important are long-term stability vs flexibility?
If you'd like personal advice on what your best options are - call us today! We're here to help.
