Should I buy or rent a house? - Times Money Mentor (2024)

The cost of living has increased at quite a pace over the last few years and so too have rental prices, making saving for a deposit as a first-time buyer that much more difficult. Once you have bought a home, higher interest rates have made mortgages more expensive. So what do you do?

For many people, the choice between buying or renting is currently a theoretical debate. Many simply can’t afford to get on the property ladder now or even leave the family home and rent.

However some decisions you make right now may have an influence on what you can do in the future. Here we outline some of the pros and cons of both, wherever you are in your decision-making process.

In this article, we outline:

• What are the pros and cons of both renting and buying?
• Will I be financially better off renting or buying right now?
• How long will it take me to save for a house deposit?
• Is it is worth buying a house now?
• What are some of the costs involved with renting?

The rent vs buy debate

Whether you should rent or buy is an old-age debate that feels particularly loaded at the moment. Many people simply cannot afford to get on the property ladder and so do not have a choice.

Over the past 20 years the price of housing has increased faster than our wages have been growing. The proportion of 25- to 34-year-olds who owned a house was 55% in 1997 and is now closer to 34%, according to the Institute for Fiscal Studies.

And the situation is worse for those on their own. Rents are less affordable for single people than any time in ten years – accounting for 35% of their income.

In fact, according to Adzuna, Middlesbrough is the only place in Britain where salaries are outpacing rent rises.

Meanwhile, rental prices have been shooting up, meaning tenants have less disposable income to set aside to build a deposit so they can buy a home.

For some people, buying a home might feel out of reach. You might want to read our guide for first-time buyers which outlines the steps and the government schemes you could use.

If you’re in the fortunate position of weighing up your options, we outline the upsides and downsides of renting and buying.

You might want to read: Is now a good time to buy a house?

Advantages to renting a home

• A tenancy can be just six months and you can move after this time if it doesn’t work for you
• Being able to give notice to vacate gives you flexibility to move to a different type of property or to a different area
• Moving out of a rented home can often be quicker than selling a property, which is useful in case a relationship breaks down. Renting can also be a handy way to test a new relationship
• You don’t have to worry about maintenance costs, meaning you are not responsible for the likes of a broken boiler
• If you rent a furnished place, the furniture and white goods are thrown in too
• Getting on the rental ladder is substantially easier, quicker and cheaper than buying a property
• No mortgage or legal fees and stamp duty to pay
• You don’t have to worry about house price movements
• Landlords and letting agents can no longer charge admin fees thanks to a law introduced in 2019 (we explain more on this in our guide for tenants).

Disadvantages to renting a home

• Big upfront costs to pay when you move house, which can include a deposit and your first month’s rent
• Your landlord might decide to increase your monthly rent when your lease is up for renewal
• No control over organising maintenance of your home so repairs can take longer than you would like
• Could have to move if your landlord decides to sell the property, which means you suddenly have to uproot your life and find somewhere else to live
• Renters sometimes find themselves battling with the landlord to get their full deposit back
• You are paying rent to your landlord, unlike your monthly mortgage payment which goes towards owning your own home
• You can’t redecorate without the approval of your landlord

Advantages of owning a house

• In the long run you will have the security of a home without the risk of a landlord booting you out
• You can decorate your home without asking permission from anyone
• You have control over organising repair works which might be done quicker than if you were renting
• Interest rates on mortgages are still historically low, though they have increased in recent months
• Once you have paid off your mortgage, you will own an entire home
• While you should think of it as a home rather than an investment, if property prices increase then you will benefit when it comes to selling it

Disadvantages of owning a house

• Saving for a deposit is hard work and takes a long time, particularly as house prices are rising which makes it more expensive.
• You have to pay mortgage and legal fees and might have to fork out on stamp duty too.
• If repairs need doing, you have to foot the bill.
• Homeowners are subject to the housing market and price movements. If the value of your home drops below the mortgage you secured on it, you will be in negative equity. Unless you have savings you can use to plug the difference between the value of your home and the mortgage, it will be tricky to remortgage or sell the property.
• Even if house prices don’t head south, the market can be sluggish. It can take months to sell a property so you can’t just move at a moment’s notice.
• Property is not as safe as houses. Historically, yes, prices have gone up but this doesn’t mean that will continue.
• Interest rates are increasing, gradually pushing everyone’s mortgage payments up too.

If you are thinking about getting on the property ladder, check out our first-time buyers’ guide.

Is it better financially to rent or buy?

A first-time buyer will find it easier to rent a house than to buy one. This is largely because they won’t have to stump up such a large deposit to rent.

In England and Wales, the deposit is capped at five weeks’ rent. In Scotland, the amount that can be charged as a deposit cannot be more than two months’ rent.In Northern Ireland, a landlord cannot ask for a tenancy deposit which is more than one month’s rent.

While the deposit needed to rent is usually much lower than that required to buy a home, rising rental prices make it harder to save for a deposit should you want to buy.

The latest figures show rents in Great Britain went up over 9% in the year to December 2023, according to Rightmove. The average advertised rent outside London is £1,280 a month.

How long does it take to save for a house deposit?

It takes nearly 10 years on average for someone to build up a 15% deposit, according to estate agent Hamptons International. The campaign groupGeneration Rentsaid that back in 2012, you would be able to save the same deposit in just 6.8 years.

The average property price in the UK is about £286,000, according to the ONS. You would need to have saved more than £14,000 for the minimum 5% deposit.

Halifax found that the average deposit for those buying their first home was just over £62,000 in 2022 – up 8% on the average the year previously. That figure had fallen to £54,116 by the end of 2023.

“The growth in house prices over the past decade means raising a suitable deposit remains a significant hurdle,” said Kim Kinnaird, Director, Halifax Mortgages.

“There is then finding the right property in a housing market with limited supply, coupled with the sharp rise in interest rates, meaning there is lots to consider for any first-time buyer.

“The average age of those buying their first property is now 32, rising by two years over the past decade, most likely reflecting that increasing costs are making the road to home ownership longer,” she added.

If you can save a deposit of 20% you will have more mortgage choice and be able to secure a lower interest rate on the loan.

You can try out the Times Money Mentor mortgage comparison tool.

Is it worth buying a house?

If you’re still weighing up your options, ask yourself these questions:

• Where do you see yourself in two years’ time? If you want a flexible lifestyle to work in different places and travel for extended periods then it might be a good idea to wait to buy.
• What makes you happy in life? Do you prize security over everything, or do you dislike being tied down?
• Are you likely to inherit property later in life? If so, can home ownership wait while you put money into a pension, savings or invest?
• Do you want to buy a home just because you think property prices will go up? If the answer is yes, it’s probably not a good idea to buy because there are no guarantees that prices will rise.
• Will you be able to afford the maintenance costs if something needs repairing?
• How much disposable income would you have after paying mortgage repayments and other bills? Make sure you feel comfortable.
• Paying into a Lifetime ISA while renting might be worth considering as it can be used for buying a house or for your pension
• Our guide outlines the government schemes to help first-time buyers.

Read more: Is now a good time to buy a house?

Is renting really a waste of money?

Some people argue that renting is a waste of money because you are effectively paying your landlord’s mortgage and giving them a profit on top.

While it is true that you aren’t building equity in a property, renting does have its advantages, as mentioned above.

Remember that your rent payments are giving you a roof over your head and you don’t have to pay for maintenance costs either.

But it’s important to make sure that you aren’t paying too much rent, so it’s worth checking what the going rate is among other similar properties in the area.

If you think you are being charged too much, have a conversation with your landlord to see if you can negotiate reduced rent.

What costs are involved with renting a home?

One big advantage of renting compared to buying is that you don’t have to worry about legal and other fees you’ll have to pay your mortgage lender.

Things have also improved for renters since 2019 when a new law came into force which prohibits landlords and letting agents from charging for fees for administration, referencing and tenancy renewal.

Landlords and letting agents also have to cap the deposit at five weeks’ rent.

This has saved tenants £113 on average, according to campaign group Generation Rent.

But there are still some costs you need to consider before renting:

• The deposit
• You will need to make sure you have the first month’s instalment of rent
• Don’t forget any moving costs such as hiring a removal van
• You might need to buy furniture and utensils for your new home too

If you’re trying to save up to move, here are some money-saving challenges you could try.

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