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Is it better to rent or buy?

Leading lettings platform, Bunk, has looked at the comparative cost when it comes to remaining in the rental market or taking that step on the ladder, and how this differs across the UK.

Bunk looked at the cost of a rental deposit and the cost of renting for a decade. Bunk then compared this cost to the financial barrier of a mortgage deposit, and the cost of monthly mortgage payments over a 10-year fixed term at a rate of 2.58%.

Across the UK the average monthly rent is £676. With the newly introduced five-week cap, that means a rental deposit costs an average of £845 and renting at this average monthly rate over a 10-year period would cost a total £81,120 – a total cost of £81,965 when including the deposit.

The current average UK house price is £226,798 and so a 10% deposit would set you back £22,680. This leaves a loan amount of £204,118 and at a 10-year fixed rate of 2.58% would mean a total repayment of £231,798, a total of £254,478 including the deposit.

This means, that renting is £172,513 cheaper than owning a home over a 10-year period when it comes to the upfront and monthly costs, with the one big difference being the bricks and mortar investment secured at the end.

This saving is most notable in Cambridge with a difference of £341,090 over 10-years between renting and buying, with the saving in London also topping £316,247.

In Bournemouth, renting over 10-years is £183,376 cheaper than buying, with Bristol (£177,613), Edinburgh (£166,547), Cardiff (£143,984), Southampton (£138,617), Portsmouth (£137,240) and Plymouth (£128,480) all home to some of the biggest savings.

The lowest saving is in Glasgow where renting for 10-years is just £43,145 cheaper than buying in the city.

Co-founder of Bunk, Tom Woolard, commented:

“Of course the big difference between renting and buying is that one leaves you with a sizable financial asset as a reward for your years of hard work making mortgage payments.

However, more and more of us are opting to rent long-term and what we wanted to highlight is that while the rental market is generally viewed in a negative light due to high rental costs, it is actually a considerably cheaper option when compared to homeownership, even with almost record low-interest rates.

Not only this but those that feel resigned to renting due to the high financial barrier of buying actually have a much better opportunity to save compared to those paying a mortgage. Whether they choose to use this for a deposit further down the road or simply to enjoy a better quality of life is up to them.”

Renting vs Buying Costs Over 10-Years
Location
Total Rental Cost Over 10-Years
Total Mortgage Cost Over 10-Years
Difference
Cambridge
£148,410
£489,500
£341,090
London
£203,579
£519,826
£316,247
Oxford
£169,993
£465,619
£295,627
Bournemouth
£104,518
£287,894
£183,376
Bristol
£130,223
£307,836
£177,613
Edinburgh
£129,495
£296,042
£166,547
Cardiff
£88,876
£232,860
£143,984
Southampton
£95,545
£234,162
£138,617
Portsmouth
£95,060
£232,300
£137,240
Plymouth
£70,083
£198,572
£128,490
Birmingham
£86,088
£209,605
£123,518
Leeds
£92,393
£207,037
£114,644
Leicester
£70,931
£185,427
£114,496
Sheffield
£74,326
£181,182
£106,856
Manchester
£99,910
£199,768
£99,858
Liverpool
£60,504
£147,298
£86,795
Newcastle
£86,451
£172,170
£85,719
Nottingham
£81,238
£160,786
£79,549
Aberdeen
£87,664
£166,328
£78,665
Glasgow
£102,456
£145,602
£43,145
UK
£81,965
£254,478
£172,513
10-Year Rental Cost Data
Location
Average Rent (per month)
Rental deposit*
10 Year Rental Cost**
Total Cost + Deposit
Cambridge
£1,224
£1,530
£146,880
£148,410
London
£1,679
£2,099
£201,480
£203,579
Oxford
£1,402
£1,753
£168,240
£169,993
Bournemouth
£862
£1,078
£103,440
£104,518
Bristol
£1,074
£1,343
£128,880
£130,223
Edinburgh
£1,068
£1,335
£128,160
£129,495
Cardiff
£733
£916
£87,960
£88,876
Southampton
£788
£985
£94,560
£95,545
Portsmouth
£784
£980
£94,080
£95,060
Plymouth
£578
£723
£69,360
£70,083
Birmingham
£710
£888
£85,200
£86,088
Leeds
£762
£953
£91,440
£92,393
Leicester
£585
£731
£70,200
£70,931
Sheffield
£613
£766
£73,560
£74,326
Manchester
£824
£1,030
£98,880
£99,910
Liverpool
£499
£624
£59,880
£60,504
Newcastle
£713
£891
£85,560
£86,451
Nottingham
£670
£838
£80,400
£81,238
Aberdeen
£723
£904
£86,760
£87,664
Glasgow
£845
£1,056
£101,400
£102,456
UK
£676
£845
£81,120
£81,965
*Monthly rent divided by four to find the weekly rate and then multiplied by the five-week cap.
**Average monthly rent multiplied by 12 to find a year and then by 10
***Deposit plus total rental payment costs
10-Year Mortgage Cost Data
Location
Average House Price
Deposit (10%)
Loan Amount
Monthly Repayment*
Total Repayment**
Total Cost***
Cambridge
£436,255
£43,626
£392,630
£3,716
£445,874
£489,500
London
£463,283
£46,328
£416,955
£3,946
£473,497
£519,826
Oxford
£414,972
£41,497
£373,475
£3,534
£424,122
£465,619
Bournemouth
£256,579
£25,658
£230,921
£2,185
£262,236
£287,894
Bristol
£274,351
£27,435
£246,916
£2,337
£280,400
£307,836
Edinburgh
£263,868
£26,387
£237,481
£2,247
£269,656
£296,042
Cardiff
£207,531
£20,753
£186,778
£1,768
£212,107
£232,860
Southampton
£208,692
£20,869
£187,823
£1,777
£213,293
£234,162
Portsmouth
£207,033
£20,703
£186,329
£1,763
£211,597
£232,300
Plymouth
£176,973
£17,697
£159,276
£1,507
£180,875
£198,572
Birmingham
£186,806
£18,681
£168,125
£1,591
£190,925
£209,605
Leeds
£184,517
£18,452
£166,065
£1,572
£188,585
£207,037
Leicester
£165,258
£16,526
£148,733
£1,408
£168,901
£185,427
Sheffield
£161,475
£16,147
£145,327
£1,375
£165,035
£181,182
Manchester
£178,039
£17,804
£160,235
£1,516
£181,964
£199,768
Liverpool
£131,276
£13,128
£118,149
£1,118
£134,171
£147,298
Newcastle
£153,442
£15,344
£138,098
£1,307
£156,826
£172,170
Nottingham
£143,297
£14,330
£128,967
£1,220
£146,456
£160,786
Aberdeen
£148,236
£14,824
£133,412
£1,263
£151,505
£166,328
Glasgow
£129,764
£12,976
£116,787
£1,105
£132,625
£145,602
UK
£226,798
£22,680
£204,118
£1,932
£231,798
£254,478
*A 10-year fixed loan payment at 2.58%, with 12 payments per year = 120 payments
**Total cost of loan including interest
***Total cost of mortgage repayment and initial deposit

 

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