Young people locked out of home ownership will spend nearly £200,000 extra over a lifetime of renting rather than buying a house, according to Barclays’ research.
Barclays’ calculations show that the costs of buying a house, paying the mortgage on and maintaining an average home valued at about £160,000 today will total £429,000 over 50 years. A tenant would typically pay £623,000 in rent for a similar property over that time.
Andy Gray, head of mortgages at Barclays, said: “The cost of stepping on or moving up the housing ladder can be a big barrier for many, but the long-term benefits hugely exceed the initial expense. Not only will you save money by becoming an owner-occupier, but you will also own a substantial asset once your mortgage is paid off, providing financial security for your old age.”
Gray warned that those who ended up renting permanently would face the spectre of having to pay their landlord from their pension income, while owner-occupiers would enjoy minimal housing costs.
The researchers said their model was a conservative estimate, and did not factor in inflation above 2% nor house moves up the ladder, both of which exacerbate the gap.
Last week the Joseph Rowntree Foundation forecast that the number of home owners under 30 would fall from 2.4 million to 1.3 million by 2020, and warned that some would be locked into a lifetime of renting.
Asking prices for houses have risen to a new high, although they remain well below their 2007 peak once inflation is taken into account, according to figures from Rightmove.
The price of a home coming to market rose in June to reach £246,235 on average. This was 2% higher than in August 2007, before the Northern Rock run signalled the start of the economic crisis, but 13% down in real terms. However, the potential easing of affordability has been offset by wage freezes, rising costs of living and tighter mortgage borrowing criteria.
Source: The guardian