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Buying a house instead of renting could save you £200,000
Barclays reveals how much more renters pay over their adult lifetime compared to homeowners.
by Victoria Bischoff on Jun 18, 2012 at 11:41Follow @VBischoff
Renting a home costs nearly £200,000 more over a lifetime than buying one, according to new research.
The cost of mortgage repayments, maintenance and other costs associated with buying a home worth £160,000 – the England and Wales average – comes to a total of £429,000 over 50 years, according to Barclays. Renting a similar home over the same period, on the other hand, costs £623,000 – some £194,000 more.
Initially, being a tenant is often cheaper, Barclays explained, as mortgage payments tend to be higher. There are also one-off costs to pay such as a deposit, stamp duty and solicitor fees as well as permanent costs such as maintenance and insurance.
However, after 25 years the buyer will own his home outright as the mortgage will have been repaid, while rent will inflate over time. What’s more, these figures don’t account for the potential sale value of the property bought.
The problem is that first time buyers are struggling to get a foot on the housing ladder and so cannot benefit from any savings.
Just last week a report by the Joseph Rowntree Foundation (JRF) warned that unless the government introduces fundamental reforms more than a million young people stand to be locked out of the housing market by 2020 – with the number of homeowners under 30 expected to be down by half.
Barclays, meanwhile, added that the potential savings a homebuyer could make varies hugely across England and Wales.
|House prices||Year 1 Rent||Lifetime cash saving from owning over renting|
|England & Wales||£160,780||£8,361||£194,341|
|Yorkshire & The Humber||£118,204||£7,801||£280,125|
In the South West, for example, where renting is cheap in comparison to house prices, potential savings are much lower than what a buyer in London could make.
Barclays also highlighted that its calculations depend on a great many assumptions – such as the buyer purchasing a property in his thirties, a steady 2% inflation rate and the homeowner making no further moves.
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