While many people are struggling to get on the vital first rung of the housing ladder, new research shows that renting could be even more financially draining than envisaged. UK homeowners spend an average of £41,900 on rental payments before buying their first property, according to a study by Santander Mortgages. On average, homeowners who rent prior to buying spend seven years as a tenant before getting onto the property ladder, rising to 11 years or more for 15 per cent of these homeowners.
Historically many people bought a property when they got married and tended to view it as an investment in the future. Nowadays, many people struggle to put down those roots. Between 1965 and 1969, the average age of first-time buyers was 25, while the average age of second-time buyers was 28, according to figures from the Post Office. In recent years this gap has climbed to nine years; the average age of first-time buyers between 2010 and 2013 was 30 and people moved into their second home at an average age of 39.
Many people will never make it onto the property ladder, particularly if they are choosing, or have little choice, but to envisage buying as a single person.
The financial cost of a life-time spent renting makes for sobering reading. That figure, according to the Santander report, is likely to be around the £296,000 mark. The cost is based on current private rental prices, which according to the banking group, comes in at £474 per tenant per month.
In addition to the regular monthly payments, most private rental tenants are also asked to make a security deposit, which currently stands at an average of £657 per tenant. Only 39 per cent of those currently renting received the full deposit funds back, with the average amount withheld by landlords being £130, or 20 per cent of the average initial deposit.
The study suggests that the average homeowner changed home every three years whilst renting, which means those who eventually purchased a property on average lost £3,113 of their deposit funds. Those renting throughout their lifetime and moving home with such frequency could see their landlords withhold an average of £2, 2014 throughout their renting lifetime.
Renting is often the most financially viable not to say realistic option for some
people, but it is not the most cost-effective. The main issue with renting a property as against buying it is that it is dead money that cannot be recouped.
Raising sufficient funds to make a deposit can be one of the biggest barriers to buying a property. There are however a raft of schemes such as Funding for Lending, NewBuy and Help to Buy on the market that make buying a more realistic possibility for many first-time buyers.
Please note: This article is intended as guidance only and does not constitute advice, financial or otherwise. No responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by Latimer Hinks. In addition, no responsibility for loss occasioned/costs arising as a result of any act/failure to act on the basis of this article can be accepted by the firm.
Martin Williamson is Head of Residential Property at Latimer Hinks Solicitors in Darlington. Latimer Hinks has a team of around 40 people serving private and corporate clients. For further information: www.latimerhinks.co.ukor call 01325 341500.