Home Owner Loans Cheaper Than Renting January 31st, 2012
A large number of potential first time buyers across the UK are currently stuck in rented accommodation, due to the fact that they are unable to afford to buy a house of their own and manage the monthly repayments on a home owner loan or mortgage.
But new research from the Halifax has shown that buying a house and making repayments on a home owner loan is actually significantly cheaper than paying rent each month for the equivalent type of property.
In fact, typical repayments on a home owner loan or mortgage are around 16 per cent, or £116 a month, cheaper than paying rent on a similar property, according to the figures from the Halifax.
In December last year, the average cost of paying a home owner loan on a three bedroom house was £600 per month, whereas the average rent on the same type of property stood at £716 per month.
The Halifax have said that the reason for the drop in the cost of buying a house is largely due to the fact that house prices have fallen significantly since 2008 and that, due to the particularly low base rate of interest from the Bank of England, there is now a wide choice of cheap loans available for potential buyers to choose from.
However, although the monthly loan cost of buying a house is much cheaper than renting, the problem for many would be buyers is still that of being able to raise a suitably large deposit to meet lender’s strict criteria on maximum loan to value levels.
In addition to the large deposit requirement, other fees also include solicitor’s fees and things like valuation fees and stamp duty, which all add to the cost of the home owner loan when buying a house.
However, whilst home owner loan rates remain low and are expected to do so for some considerable time, the average rent has increased at a rate of 9 per cent since 2009.