In the 1980s, the parents of ‘generation rent’ saw buying their first welcome mat and putting up net curtains as one of life’s great achievements.
But today, many first-time buyers are debating renting versus buying and asking themselves the question: is it worth scrimping and saving for the seven years that it typically takes to save for a deposit?
The flexibility of renting
Because of preference or means, for some the answer is ‘no’, and it often doesn’t feel like a sacrifice. Many apartment renters and city dwellers can expect additional services such as a concierge, regular maintenance, and a gym or swimming pool all wrapped up into their monthly payment. And with new initiatives around, there’s no reason to be without the benefits that mortgage-payers have. The Rental Exchange allows the rent you pay to have a bearing on your credit score, and this information is provided to lenders and prospective letting agents/landlords to ensure that renters are on a level playing field with homeowners.
Renting is also deemed to offer more flexibility, and this is important. In our mobile world, renters avoid being financially tied to one spot, and they are less sensitive to the slings and arrows of declining fortune when the economy takes a turn for the worse.
The economics of buying
In making the decision of whether to buy or rent, consumers should consider all the financial pros and cons. We assume that rent money towards that nifty communal swimming pool could be put to better use saving for a deposit, but is this really the case? A recent study from Santander found that lifetime renters end up handing over nearly £300,000 to private landlords. Even the seven-year deposit-gathering period sees the average renter shifting £40,000 over to someone else. And delaying the decision entails a cost: HSBC’s head of retail credit services noted that those who don’t expect to be able to buy until age 35 are likely to be close to 68 before they own outright.
Ensuring client suitability
We can draw from this that even late in life housing payments constitute a significant portion of household spending. Fortunately, Experian Property Data unlocks insight into clients who own or rent. Ahead of the customer’s move to another flat or a bigger house, we can help you understand equity positions so you can gauge a customer’s suitability for finance and provide early warnings about their home moves to make it easier to tailor your product offering.
What really matters?
As for the rent versus buy decision, a study by Zoopla.co.uk showed that with a 10% deposit, buying is even cheaper than renting in many places. But there’s often more to it than just financial considerations. Citing his belief that what matters about our homes actually extends beyond the front door, Kevin McCloud of television’s Grand Designs counselled readers of the Times to “reconsider how we choose to live in terms of renting. There seems to be an allergy to that here and yet renting is a perfectly good idea.” As with so many of life’s uncertainties, there’s a deeper question underlying the obvious one of whether to buy or rent. It usually comes down to what makes us happy.
Whichever path is chosen, Experian will ensure that housing history helps you and your customers along the way. For more information about how, please contact us at firstname.lastname@example.org