First time buyers still better off buying than renting

August 6, 2008

According to a recent report first time buyers in many parts of the UK would still be better off purchasing a property than renting on a long term basis, despite increased borrowing costs and tight credit conditions. The report states that with house prices falling and rental prices rising many first time buyers could save thousands of pounds over a twenty five year period if they purchase a home rather than renting one.

However, this does not apply in all areas. Whereas buyers could save an average £10,500 over a twenty year period in many others – and even up to £60,000 in some areas – there are also areas, such as Northern Ireland, where the buyer is more likely to lose out over the longer term compared to the first time buyer that rents. At present many first time buyers are reluctant to buy despite falling property prices, with fears that the value of the property may plunge further once they have made the purchase.

This has resulted in more interest in private rentals, and landlords are seeing strong demand for rental properties. Figures show that over the past two years buy to let loans have been increasing, and they now account for around 10% of all mortgage loan lending. Despite these reports some officials say that tenants are more likely to be able to cope with the current financial climate compared to homeowners, with one official stating: "They don’t have to remortgage, won’t suffer equity losses and their expenditure on basic commodities is lower too."

Another reason why many first time buyers are deciding to rent rather than buy is because they cannot get the finance to purcahse a home. First time buyers are amongst the hardest hit groups in terms of the tighter credit conditions and increased borrowing costs that have stemmed from the global credit crunch.  

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