YOUR PORTFOLIO Buy or rent ?
forecast a collapse of 10 to 15 % if borrowing costs continue to rise . Such falls have historical precedent . The crash of the early 1990s caused the average house to lose 20 % of its value between 1989 and 1992 . The main driver in that case was a rapid increase in interest rates , which doubled to almost 15 % between 1988 and 1989 . This year , a surge in inflation forced the Bank of England ’ s hand . Rates are now at 3 %, up from 0.1 % a year ago , and are tipped to peak at just under 5 %. Could history repeat itself ?
False economy House prices were expected to fall post-Brexit and post-pandemic , yet in both cases , they continued to climb – even the cleverest analysts don ’ t have a crystal ball . Simon Tollit , partner at estate agent Tedworth Property , notes that property prices in London fell substantially during the crash of the early 1990s , but they had also grown the most when the bubble inflated . The “ scarcity of product ” in prime central London means it is unlikely to be a microcosm of the situation across the country . “ Not to be overly bullish – you ’ ve
In figures : Is it better to buy or rent ?
The average UK tenant currently pays
£ 1,143 a month for a private rental property . The average price of a UK property is now £ 292,118 . If you opted to buy this property with a three-year fixed-rate repayment mortgage ( assuming a 75 % loan to value ) at 3.31 %, the monthly cost would be £ 1,074.61 . If you chose a variable-rate mortgage at an average rate of 4.45 %, the monthly payment would overtake the rental cost , reaching £ 1,211.55 . Does this make renting the better option ? No , as while £ 812.45 of that monthly mortgage payment accounts for interest , £ 399.05 is taken off your debt , making you that little bit richer . More importantly , while rents tend to rise over the long term , the amount you owe – ignoring the fluctuations of interest rates – will stay fixed for the term of your mortgage . This is why inflation is the homeowner ’ s friend , and anyone actively choosing to rent rather than buy is inadvertently betting on a significant fall in house prices .
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