The amount of people renting, and the average age of first time buyers has risen, partly due to the banks’ refusal to lend during the recession.
High house prices are also pushing people off the property ladder. Barclays conducted research on the matter, and revealed that it costs tenants £194,000 more to occupy an average home than owner-occupiers, over a 50 year period.1
It Costs £200,000 More to Rent, says Barclays
Barclays did not even include capital appreciation in their study, but did take mortgage repayments and maintenance costs into account. Ownership, they found, costs about £429,000 in 50 years, whereas renting the same house would cost £623,000 in the same period.1
The bank used Land Registry figures for house prices and deposits. They also added in Stamp Duty, and solicitor’s fees of £1,200 when determining home ownership. The bank estimated yearly maintenance expenses of 1.25% of the initial property value, and they expected annual building insurance to increase with inflation each year.1
House prices were also projected to grow with inflation.
LSL Property Service’s buy-to-let index, and FindaProperty amounts determined rental costs, which they also predicted will rise with inflation.
The calculation is as accurate as it can be, regarding the undeterminable factors that could influence the costs.
The bank is also introducing a new mortgage scheme designed to help parents aid their adult children to escape generation rent. The Family Affordability Plan will take into account both the parents’ and adult childrens’ earnings.
Head of Mortgages at Barclays, Andy Gray, says: “The cost of stepping on or moving up the housing ladder can be a big barrier for many, but the long term benefits hugely exceed the initial expense. Not only will you save money by becoming an owner-occupier, but you will also own a substantial asset once your mortgage is paid off.”1
If this is taken into account, the lifetime gain of owning your own home trebles to £595,000.