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As banks and other financial institutions stick to very tight criteria for mortgage lending, the debate over whether it is wiser to buy or rent a property has again come to the fore. Currently, it is sad but true that many people have no choice in the matter. They are forced to rent while they try to scrape together the funds needed to meet the demands for a high deposit by lenders who are increasingly wary of their exposure to bad debts in a turbulent housing market. Deposit demands of 20 or 25 per cent of a property’s asking price are becoming the norm. In contrast, landlords or agents usually ask no more than the equivalent of one, or at most, two months’ rent – a much lower sum – and given this disparity, renting has a clear advantage in this respect. However, the vision which drove the home-owning boom of the late-1980s and early 1990s in the UK was that at some point in the future – never mind that it might be 25 years or more – home buyers would eventually own their property outright, and therefore have a major asset which they could subsequently trade up or down from, or sell to release the proceeds for other needs.
The situation has changed at present, however, as a combination of the aforementioned difficulties in obtaining finance, and uncertainty over the short-term direction which house prices will take, have planted doubts in many people’s minds that this is a wise move.
Another counter to this argument is that, with interest rates currently at historically low levels, if people can get a mortgage, their repayments will be less than those demanded of homeowners for many years, in relation to the value of their home.
Research by Zoopla.co.uk suggests that renting can be cheaper than buying in some major cities and towns in the UK, including Cambridge, Swansea and Oldham – a big reason for this being that the quantity of rental property available relative to the potential market in these places means renters can negotiate significant discounts.
However, an important point to bear in mind is that the only time that a mortgage-holder really needs to be concerned with the value of their home is when they wish to sell it and buy another. At all other times, they should remember that they possess an asset of which they can have full use, and on which they can stamp their own personality.
There is therefore no doubt that, even if house prices have still further to fall – which most experts consider highly likely – owning your own home, provided it is well looked after, is still the preferable option, because it is an asset which can be adapted to suit your own needs.
About the Author: Jaimy Howard is a writer for Assetz Investors specialists in buy to let properties and off market land for sale.