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First-time buyers vs renting

Journalist: Melissa Lawford, The Telegraph

ended 18. August 2023

Is it now cheaper for first-time buyers to keep renting instead of buying their first home? How much have high mortgage rates reduced their borrowing power? How much money can they save by renting? What conversations are you having with first-time buyers - are they now planning to rent for longer because of high mortgage rates? What do you think this will do to rent prices and house prices?

7 responses from the Newspage community

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Ellis Shepherd
Business Owner, Senior Broker at All About Mortgages
First-time buyers who can afford to borrow the money they need to buy a property, where they can pay their own mortgage instead of someone else's, are onto a winner. Not only will they benefit from paying their mortgage and building equity, they will also enjoy the security of owning their own property. They won't need to be worried about their landlord selling up or moving them out, as the landlord's payments become too much or their investment is no longer that appealing to them. Conversations with borrowers generally reflect the above right now. Borrowers who can afford to buy are exploring this, especially those who are currently renting and have seen their payments increase. Aspiring first-time buyers who still live at home with their parents tend to be waiting for the right moment. Living with parents may pose some challenges to their lives and freedoms, but without the large rental costs, more money can be saved to help them get that important first step on the property ladder.
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Samuel Mather-Holgate
Independent Financial Adviser at Mather and Murray Financial
Buying your first home is about more than the economics. It also brings with it a sense of security and a foundation for putting down routes. That is why, first-time buyers are keeping the proper market afloat. It is the area of the market with the most activity. First-timers are used to paying high housing costs through rent, so higher mortgage prices don't neccesilly put them off like home movers. The most difficult aspect of becoming a first-time buyer is saving for your deposit. If you've done this, you must be disciplined and good with money and the temporary spike in rates won't put you off grabbing a bargain in today's conditions.
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Stephen Perkins
Managing Director at Yellow Brick Mortgages
Those considering buying their first home find themselves in a difficult situation at present whether they buy or rent. Mortgage rates are now higher reducing their affordability, but rents are also increasing and once you are in the rental trap, saving a deposit can be very difficult. For many staying home with parents to save, or living in shared houses with friends for cheaper rent will likely be a needed short-term sacrifice.

For those well placed to rent or buy, it depends on how flexible they need to be in the next few years, as renting offers more freedom to move. Many first-time buyers will look at the current market conditions, and think that over the next 6 months rates and house prices may both reduce a little, so conclude that waiting might be the best option, or a 6-month rental agreement in the meantime.
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Gareth Davies
Director at South Coast Mortgage Services
It's a tough time for First Time Buyers due to the increased mortgage costs we're now seeing, but people still prefer to pay their own mortgage than their landlords. The average house price was around £288k in June. If a FTB wants a 90% mortgage on this, fixed rate costs currently start at around £1,393 per month on a 35-year overall term. It'll be heavily dependent on region, but i'd be confident that this is a fair bit more than rental costs for a similar home in most areas outside of London and parts of the South East. If a FTB can still buy in the current climate, with rates around 6%, it will put them in good stead for the future for sure.
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Clive Read
Owner at Goldmanread
The increase in rents means it's still good advice for FTB's to access the property market if they're able. Increased mortgage rates have impacted affordability but its come with some downturn in property prices to make up for it. First Time Buyers we speak to are still enthusiastic about entering the market, though there is a little uncertainty about the best timing. In the meantime they are extending rentals if they are able. Rents will continue to rise as mortgage rates increase and buy to let landlords exit the market. Higher interest rates, more property on the market and less buyers may impact house prices in the short term but our own view is that we are unlikely to see any "crash" in house prices. This is especially the case given the structural housing supply crisis in the UK property market.
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Gary Bush
Financial Adviser at MortgageShop.com
From our side of the fence it's always better to buy a property than rent one in terms of the ability to make changes as you wish to your home surroundings without having to seek approval, control over how long you live somewhere, and in the longer term in equity growth terms.
Although interest rates have now seen a correction, due to multiple factors, the cost of rents have also seen dramatic increases too - there isn't much in it.
An English mans (or womans) home is his (or her) castle after all.
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Ross McMillan
Owner/Mortgage Advisor at Blue Fish Mortgage Solutions
Thanks to misguided Scottish government regulations, monthly rental prices have skyrocketed, especially compared to the rest of the UK and this mess isn't untangling soon due to chronic undersupply so despite high-interest rate perceptions, owning a home is still a smart move for many Scottish first-timers both short and long term.

Local variation and nuances exist but, as an example, the average two-bedroom apartment in Glasgow, demands an average rent of £1150 whereas to purchase the equivalent property with just a 5% deposit and mortgage of circa 150k could currently be around £850- £900 a month..so with these kinds of figures, its no surprise that first-time buyer activity remains one of the most important and thriving sectors of the Scottish housing market...and there are no signs yet of this diminishing anytime soon.