≡ Menu

Reasons to buy a house instead of renting

UK houses are usually expensive to buy

The following guest post on the reasons to buy a house instead of renting is by Tejvan Pettinger from The Mortgage Guide UK.

The UK has one of the highest property owning rates in the world. No matter how many boom and busts we have, the British like the idea of buying their own house.

Part of the attraction is not just financial, but the sentiment of owning your own house, not worrying about having dodgy landlords, and being able to paint your walls whatever colour you want.

Owning a house does bring more responsibility. But unless we are frequently moving around the country, most people would buy if given the opportunity.

Yet, for first time buyers, the ratio of house prices to earnings means that it is very difficult to buy – unless you can borrow from The Bank of Mum and Dad or be helped by the UK State.

Is it really worth the effort, or are we better off renting? Does our sentimental attraction to buying our own castle make sense?

Let’s first consider the advantage of buying a property.

The end is in sight

A mortgage may last for 25 or 30 years. But there will eventually be an end to the mortgage payments, which means the hope of being able to live rent-free for your remaining years.

In this way, paying off a mortgage is similar to saving for a pension. If market rent is £800 a month, then finally paying off your mortgage will be the equivalent of saving that cost of renting.

With rising life expectancy, people are living longer. Therefore the benefit of paying off your mortgage is increasing, too . The old saying that ‘rent is dead money’ is true.

Of course, it depends how old you are, and how long you imagine you may live.

If you are 40-years old, getting a 30-year mortgage may not seem to give much benefit. But, if you live to 90 years, that would still be 20 years of rent free accommodation.

Rents also rise with inflation; often in the UK they rise faster than inflation.

What about fluctuating interest rates?

Interest rates are currently exceptionally low. The most likely scenario is for rates to increase to 5% in the medium to long term, though it is not a foregone conclusion – Japan has had zero rates for over a decade.

Clearly, affordability is being helped by these record low rates. When buying however you need to budget for rates of 5%, and bear in mind that rates have risen to over 10% in living memory.

You can experiment with a mortgage repayment calculator to see how the costs would vary with higher rates.

It may seem the prospect of base rates jumping from 0.25% to 5% would dramatically increase cost of mortgages, but many lenders have not passed on the full base rate cuts onto consumers. If base rates rise to 5%, the actual mortgage payment you pay is unlikely to go up as much.

As a rule of thumb, look at the cost of the longest fixed rate mortgage and not the variable mortgages.

Housing as investment

There are two types of house buyers. One type buys a house to live in rather than rent. The other type invests in property – usually via buy-to-let – hoping for an equity gain.

The first type, the average householder, is less affected by fluctuations in house prices. The key thing is the cost of mortgage payments and the other bills.

In contrast, the buy-to-let investor is much more concerned with gaining equity in addition to income. And that requires rising prices.

Forecasting UK house prices is a tricky business. The professionals often get it wrong, and some have actually given up trying to make house price predictions.

  • On the one hand, house price to earnings ratios are very high compared to previous decades and also compared to other countries.
  • On the other hand, the UK has a shortage of housing that is unlikely to be solved anytime soon. This shortage of housing compared to the number of households means property could continue to be attractive for the medium to long term.


It is worth looking at your local area, and considering how much you pay to rent versus how much would mortgage payments cost (assuming a good fixed rate mortgage).

In my own experience of living in Oxford in 2005, I tried very hard to buy. The reason was that renting was very expensive – around £800 a month plus bills. So I though why not pay £800 a month on a mortgage?

I borrowed from my parents and got a dodgy 2005 style self-certification mortgage. It was the best thing I ever did.

I couldn’t face prospect of paying £800 a month rent (that will continue to rise with inflation, if not more) when I retire, whereas mortgage payments will become a smaller percentage of income.

If I was an investor, considering whether to buy a second home, I would be much more circumspect. Equities or the bond market may offer a better rate of return.

Note: I have republished this post from the archives because the core reasons to buy a house versus renting haven’t changed, even as various parameters have arguably become more stretched. Be aware that some of the older reader comments might now be dated, however. On the other hand, that does provide interesting context to this timeless back-and-forth! 🙂

Receive my articles for free in your inbox. Type your email and press submit:

{ 51 comments… add one }
  • 48 The Investor December 19, 2016, 11:00 am

    @RumTumF1 — I’d say the concept of the property ladder is now a relic of a previous era of high inflation. 🙂

    When inflation was high, house prices were increasing but so were wages. The net result was that if you bought a small starter home with a big mortgage, in a few years you’d be earning a lot more, your house would be worth more, and inflation would have eroded away much of the ‘real’ value of your mortgage. You were thus better-placed than somebody who had enjoyed the salary increases but hadn’t also got the boost from their property going up in value, and hence wasn’t moving up the ‘ladder’.

    Today the increasing earnings part of the piece isn’t there, and nor is the inflation whittling away the real value of mortgage debt. The house price increase part is there of course, but all that has effectively done is move the ‘rungs’ further apart, which seems unsustainable.

    (Keep in mind I’ve long been bear-ish — and wrong — about house prices for this and other reasons though!)

    I am not saying the ‘ladder’ concept was some good and natural state of how things should be with property, incidentally. I am open-minded as to that, but I could very easily argue it was another one-off / one-time anomaly that helped make so many of the baby boomer generation rich.

  • 49 mat February 27, 2017, 6:50 pm

    Just jumping into this site, loving the UK slant. I’ve got a couple of BTL properties and a residential. The combined return on (leveraged) cash has been pretty amazing. Back of envelope – 5% rise in value on 30% deposit is still 16.6% return, add in say 5% rent and you’re doing pretty well. Double that rise because you’re in London and in a couple of years (months if you redevelop) you can end up with a cashflowing property and your original deposit in your pocket. Obviously S24, increased rental stress tests and changes to PPR relief has changed the landscape massively.

    The BTL money train may have slowed down but owning a residential IMO is still a great idea if at all possible. Hardcore landlords will end up passing any upkeep costs onto their tenants anyway.

  • 50 Trevor May 15, 2017, 12:55 pm

    For anyone that owns a property and is looking for a bit of protection from fraud, check out https://www.gov.uk/guidance/property-alert

  • 51 Raeger Wynchester November 25, 2017, 7:51 am

    The part of the article that appealed to me the most is the idea that by owning my own home, I won’t have to worry about having landlords and that I can repaint, redecorate, and remodel to my heart’s content. That’s actually the reason why I really wanted to buy a home since I was in college. I love redecorating, and if I’m renting, I have to ask for permission before I touch anything. Thanks for the article. It’s actually quite encouraging.

Leave a Comment