To ask who chooses to pay rent rather than buy?

[fluffiphlox]

I am laid up at the moment and resorting to watching Homes under the Hammer etc. My query is who the dickens is choosing to pay £500 plus per month (some rentals are £1200+). Isn't this more than a mortgage? I'd be interested to know who renters are and why? Most of the properties are family homes rather than student lets etc so why would a 'grown up' choose to give their money to a landlord rather than service a mortgage?

fluffiphlox - don't you follow the news?

And also did you miss that students now incur massive debts while at uni, so no, they cannot buy a house as soon as they graduate to grown-uphood.

Sheesh.

Yes I am aware of the news. But where I live property is still going up slowly so that suggests there is a demand, so someone must be buying. As I say the whole thing sounds totally contradictory. I don't really need the sarcasm, I have appreciated the more straightforward answers.

even if you have a good salary, it takes ages to save up a decent deposit with house prices as high as they currently are

"why are houses so expensive? What is supporting the price?"

high demand-low supply

more people needing houses than are available, power resides with owners of houses that were given 100%/90% mortgages to play with and bought houses that were too expensive. they refuse to drop the price and lose money, so people rent off them rather than buy- they're getting their mortgage paid and the person in need gets more affordable (than a deposit/mortgage) a roof over their head.

i also agree that unless you are paying capital off your mortgage, you're still only renting.

Yep, pretty much what everyone else said. It's obvious, isn't it?

My rent is well over 500 and I know people who're paying over a grand a month for little one and two-bed flats, and it's depressing. But you need a deposit for a mortgage, and you also need a steady income.

It's not a choice.

then honestly why are you asking such basic questions? That's not sarcastic BTW

The average house price in the Uk is £250,000 and most lenders at the moment require 20 a 25% deposit so at least £50,000. And in order to borrow £200,000 you need to be earning approximately 25% percent of the loan amount so you must have an income of at least £50,000.

And crunching the numbers on real house valuations, the mortgage repayments including interest on an 80% mortgage would be about 10% less than the rental amount. For that extra 10%, the tenant gets repairs, maintenance, heating, electricity and appliance cover and protection from investment loss. So, in response to 'isn't that more than a mortgage', only marginally.

I loathe owning a house. I worry about it constantly (it's an old house) and tbh I feel pressured into having a gracious home. Renting was great (good landlords always) as roof maintained, pointing maintained, decorating done by them: worth the money for peace of mind and detachment.

Of course it's like a pot to keep your savings in, I can see that, wish there were a different way as homeowning is stressful and tedious.

I make the choice. I've owned my own home and it was a pain in the fucking arse.

I doubt I would ever buy again. Unless I won the lottery

Is it actually any cheaper to have a mortgage?

Rent
Pay your rent.
For this, you get a roof over your head, and your repairs are (or should be!) done for you.
downside - some places don't let you decorate how you want to and if you're in private rented, you can be asked to leave.
You don't ever own the property.

Mortgage
you pay your mortgage
and buildings insurance
and are responsible for all repairs
you own your house after the purchase price plus all the interest has been paid off.
by which time you are quite elderly and may need to sell it again to pay for your care.
Assuming you don't, you basically pay off your mortgage and die. So your kids inherit.

I would love someone to work out how much a house of, say £150, 000 ACTUALLY costs. the £150,000 + interest on the £150,000 + buildings insurance + average cost of repairs + any legal fees etc + factor in at least one move...

and compare that to rent x X years.

(I'd do it myself but I am shit at maths)

Seems to me that at the end of the day, the financial benefit of having a mortgage as opposed to renting is really your children's. Not yours. And the only real benefit is that providing you pay your mortgage, you won't be asked to leave.

And you can choose what colour to paint your walls.

And whether to have one cat or ten

It seems to me it's more about perceived freedom than finances.

I prefer to rent rather than buy. Had houses and mortgages when I was first married and was always worrying about the insurance, or the drains etc. and also I couldn't afford to buy what I can afford to rent. Once I was divorced I hadn't enough money for a deposit so had to rent. Actually I now find it's better. I've moved down south so property is very expensive to buy but I can rent a substantial place with grounds etc. whereas I could never afford to buy such a place (not a big salary and still no deposit!) Also, I don't have to worry about upkeep of the place, the owners do that. I will still rent when I reach retirement, it means I can choose to move to any part of the country I please, I'm not tied to a property and all my money is free for me to spend, not sink it into some deposit on a roof over my head....

Having your own home does not equal savings pot. You'd think it would, but it doesn't always work out that way!

Some people rent because, although they would prefer to buy, they have no option but to rent - they do not have the deposit.

I know many people who could afford to buy but choose not too. They prefer the flexibility, not being tied to one city (or country), not having to be bothered with maintenance etc. What's the point of buying a house in London if next year you will be in New York or Tokyo, and who knows the year after that? A lot of people don't buy until they are into their 30s and have chosen where they want to settle down.

I also know people who rent because it works for them from a tax perspective - people who, despite being UK resident and working here, have no UK bank accounts - the rent is paid from an offshore account, or in cash.

Also some people may not get approved for a mortgage particularly if they have a bad credit history.

Haven't read all the thread but I rent for a number of reasons, mainly financial. I owned with my ex and when we split three years ago the only option then was for him to buy me out. So now I'm off the ladder and the £1287 me and dp pay in childcare fees means we have no hope of saving deposit til dd hits school, especially when paying £1100 rent. So there are many reasons why people rent op, it's not always about choosing not to buy

What's the contradiction?

House building hasn't met demand since 1980.
Right to buy flooded the market with cheap property that then sold for high, high prices
Banks gave out 120% loans
Homes were overvalued
Buy to let mortgages meant people could buy up swathes of housing to let out
Many homes are empty despite demand
Banks now don't lend without large deposits (standard first time mortgage was 40% deposit three years ago, it has gone down a bit since then to 20-40%)
The only people who are buying are people who bought early and have a large amount of equity in their homes, meaning they can pay v high prices. This pushes up the price further and makes housing costs unlinked to wages.
Wages, especially for graduatates, have stagnated.
In 1990 the average house was 3x the average salary. It is now 7x the average salary.
Many sellers are putting their houses on at prices that are ridiculous and are unwilling to be told so (there have been some threads like this recently)
Homeowners expected their house value to rise so house prices raises became a self fulfilling prophesy

Oh, and by the way, not all rents stipulate whether you can decorate or not. I've had rented places where the owners don't care and I've repainted, made alterations, fitted new kitchens and put in fireplaces etc. It's added value for the owner so they are happy. Also, if you go to a rural county such as Lincolnshire or Herefordshire, there are whole farmhouses on estates which are lying empty 'cos no-one wants to live in them. You can rent them from the landowner, do them up and even pass them onto your children so long as you pay the estate rent...brilliant, don't know why more people don't do it. In France most homes are rented rather then bought, it's only UK which has a real "thing" about owning your home...

Catriona100. I am asking 'basic questions' because I want to know the answers. It all seems, as I have said, totally contradictory. Property values seem to go up regardless, admittedly slowly.
Thanks again for the reasoned responses.

My understanding of a lot of issues, based on cursory knowledge:

Buy-to-let and Property Developers have had a major impact in keeping house prices high - those who made money in the boom times, deciding to let their investments to make an income, and / or buy more houses and do the same again. My completely anecdotal inkling is that these people are the ones buying a lot of houses. They have high rents because of the housing shortage in some areas (plus the fact that not many people have the deposits thanks to the change in lending culture post-credit crunch), and as a consequence people can't afford to save for deposits. Plus, as people have said, because the lenders are a lot stricter post-credit crunch, you have to have 10-20% at least ready for a deposit - the thing feeds on itself.

The people buying seem to be: a) those who made money in boom times (i.e. lucky enough to have bought and sold either at the right time, or in the right place) b) professional or semi-professional property developers c) people who have in inheritance, d) people whose parents can give them a deposit.

There are some schemes, mainly new builds where you can borrow some of the deposit, but these tend not worthwhile for the long term: i.e. if you are like me, in your early 30s and hoping to buy a family home that will grow in value rather than a new build one bed flat that will probably never sell again.

oh dear

this will not end well

Hectate - downsides of renting.

1. the rent goes up annually and it all depends on how much the landlord thinks he can get away with. If you don't like it, then you can leave:

If you are in a furnished place, you can just pack your suitcase and move. It only means a day off work, plus the money to get the whole place professionally cleaned, plus the hassle of trying to get your deposit back, doing all the change of address stuff etc But if you rent unfurnished then its all the above plus a full house pack and move. Last time it cost me 6 weeks of my life and £2000

In sum: the rich are getting richer!

EthelB: thank you.

Also the interest rate has been ridiculously low for a few years now which means that people have either switched to very low interest only repayments or their capital and interest repayments are just lower.

It also means that with an interest rate so much lower than inflation, savings are losing value all the time and when people are faced with saving for years to raise a mortgage and seeing the value of those savings drop all the time, it's like swimming upstream.

Anyone would think they wanted people to spend instead of save...