The renting vs owning debate has been going on for years, but recent research has suggested that homeowners making monthly mortgage repayments on the average £230,000 home, will be paying around £133,700 less over the next 30 years.
In fact, the report from the Intermediary Mortgage Lenders Association (IMLA), has revealed that buying as opposed to renting could leave you around £352,500 better off over 3 decades, even if house prices failed to rise.
Borrowers facing barriers to homeownership
The research carried out by the IMLA does draw attention to the benefits of homeownership. However, it also serves to highlight the current disparity in future prospects for those able to buy a home, and those facing barriers getting onto the housing ladder. Many are struggling to get a foothold due to high property prices.
Mortgage rates would have to exceed 11.5% throughout the life of a loan, before they reach the costs involved in renting, according to the IMLA’s research. This falls way above the current testing levels that the majority of lenders conduct, when it comes to assessing borrower affordability.
It’s not just house prices that serve as a main barrier to first-time buyers, as the research suggests that the tightening of mortgage lending criteria since the financial crisis has also prevented and limited options for many potential buyers. Borrowers are also having to find larger deposits, often relying on help from family and friends simply to be eligible. This is despite the fact that prevailing low interest rates have made loans more affordable once they’re in place.
A call for regulation changes
Following the report, the IMLA has called on the Government to look into the cost-benefit analysis of how mortgages are currently regulated. To see if the rules are contributing to some consumers being excluded from homeownership.
The executive director of IMLA, Kate Davies, has stated that those who own a house will save hundreds of thousands of pounds compared to those who continue renting. In spite of the potential benefits, there has still been a ‘marked’ decline in homeownership amongst younger people.
“People who have been renting privately and comfortably making their monthly payments are struggling to obtain a mortgage with the same or even lower monthly payments,” she said.
“We think that now would be a good time for the Government to take stock and assess whether current mortgage regulation is working as intended, and in the interests of UK plc.”
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