Buying still cheaper than renting - but not everywhere: UK Property Shop News

Abbey's annual 'Rent vs Buy' report shows that homeowners are still better off than renters by an average £24,372 (6%). However, for the first time, the cost of owning a property over a 25-year period is higher than renting in some areas of the country. The biggest savings for buyers can be found in east Scotland (£81,157 = 20%) and west Scotland (£69,779 = 20%). The biggest savings for private tenants can be found in Wales (£27,416 = 8%) and the south west (£21,009 = 5%). However, this does not take into account the fact that people who have bought will own a mortgage-free property at the end of their mortgage term.

Previous Abbey 'Rent vs Buy' reports show that the gap between buying and renting has been narrowing each year. House price inflation of four or five per cent over the past year has tipped the balance towards tenants, but homeowners still have the advantage in the end as a homeowner will own the property outright at the end of a mortgage term.

Abbey's report showed that:
* The average cost of buying a property over 25 years is £379,341 compared with £403,713 for renting.
* The average saving (£24,372) is approximately equivalent to an average year's salary.
* The most expensive area to buy is Greater London and the most expensive area to rent is the south east, narrowly beating Greater London.
* The cheapest area to buy is west Scotland and the cheapest area to rent is Northern Ireland.
* The biggest savings for homeowners are in east and west Scotland, where homeowners are 20% better off than renting.

Sue Hayes, Director of Abbey's Product Marketing, said: "In the short term, a private tenant might be up to £1000 a year better off than someone who had bought a property in areas such as Wales and the south west. However, in the long term, paying rent is simply lining landlords' pockets and tenants wouldn't even have a property to show for it. Aspirations for home-ownership in the UK remain high, which is why mortgage lenders must take a flexible view to affordability. First-time buyers might find it difficult to get on the property ladder, but they are better off in the market than out."

Homeowners do not have landlords who can serve notice to vacate a property or put up rents and administration charges. Private tenants are also much more restricted in terms of their lifestyle or how they can modify their property. Owning a property gives financial flexibility in terms of trading up, downsizing or releasing equity.

Abbey believes that young people planning to buy should save up as big a deposit as possible to get the best start. Its research shows that over 90% of first-time buyers intend to save a deposit, but they are being held back by low salaries and repayments on credit cards and loans.

Despite the savings that can be made compared with renting, Abbey warns that buying a home should not be considered a guaranteed investment, even over 25 years. It is difficult to predict how house prices will move over such a long period. In the last 15 years, house prices have fallen as well as risen, and interest rates have fluctuated by more than ten per cent, showing that repayments can vary significantly. Borrowers must therefore think carefully about buying a home and take good advice on choosing the right mortgage - weighing up choices between fixed and variable rates as well as fees and costs.