Renting v Buying - should I rent or buy a property?

Dice labeled with 'rent' and 'buy'

The answer to this question is not straightforward. It comes down to personal circumstances and current market conditions and is always a hotly debated topic. The case for and against both options can easily be made. Fundamentally it depends on an individuals personal circumstances.

Recent record low interest rates have played a significant role in keeping the cost of borrowing low and driving down monthly mortgage payments. But lending criteria have been strict and inflation has been consistently above the Bank of England's target. Speculation is now growing about when - and by how much - the base rate will be raised to counter inflationary pressures. So, those on tracker mortgage could see their monthly payments start to rise soon.

While buying wins out over renting today according to our latest research, the impact of a rise in interest rates cannot be ignored. If interest rates were to increase by 1% and rents to remain the same, renting would become more cost-effective in 80% of the locations we recently studied.

If you are thinking buying in the current market you must keep in mind how rising interest rates would affect your monthly payments. Fixed rate deals remain the best way for borrowers to protect themselves against this uncertainty, but they don't suit everyone's financial situation.

So, because we don't know your personal circumstances it would be hard to say you should rent or buy. So instead, here are some reasons to consider when looking to rent or buy:

Buying

1. You're investing in your future

If you own your home and have a repayment mortgage, rather than interest only mortgage, you are investing in your future and creating a valuable asset. Your monthly repayments aren't going to a landlord and creating 'dead money' for you. However whilst the value of your property may go up as well as down, at the end of the term of the mortgage you will own the property outright.

2. Freedom

If you own your home you can do what you like to it (within the planning regulations). You can make it a home for your family or simply move in and carry on. You'll also be in direct control of any problems with the property and won't have to deal with agents or Landlords.

3. Discipline and experience

The house buying process can be a daunting one, but when you have done it once, the process is very similar for future purchases. If you're a first time buyer, owning your first home [h1] can be a great way to kick-start financial planning for your future and help you to create a household budget to manage the costs of running a home.

4. Community

An often overlooked advantage of buying your property is that you're also becoming part of an existing community that makes up the local school, church or shops and create lifelong friends and support.

Renting

1. Flexibility

Renting allows you to choose pretty much where you like to live. In most cases you can break a rental contract after 6 months, allowing you to move to a new location or try a new location perhaps as a test before you decide to commit and buy in the area.

2. Free from financial responsibility

As a renter you are not going to fall foul of any housing market related conditions. You will of course have to pay rent but you're not tied into monthly repayments on a bigger loan and therefore cannot fall into negative equity.

3. No maintenance costs

As a tenant it is the responsibility of your landlord to maintain the property, pay for decoration and its upkeep.

Our latest Rent v Buy Index can be found here.