Renting property is a good option
The housing market is changing. The days of easy money are over, with lenders no longer offering 100 per cent or more of the value of a home.
Prices are likely to stagnate in 2008 and with mortgages more difficult to come by, renting could be a good option.
The rungs on the property ladder are snapping because lenders themselves are also suffering from the credit crunch. They can’t get the funds to lend to would-be borrowers.
As money gets scarce, only borrowers with the biggest deposits and best credit history will get cash.
People coming off a special deal now face an uncertain future. If they can’t move on to another special deal they could see their repayment soaring by hundreds of pounds a month.
The good thing about renting, says Ian Potter, operations manager of the Association Of Residential Letting Agents (ARLA), is that you have flexibility. “You can move about to follow jobs or just have the lifestyle you want without the commitment of a mortgage.”
The huge number of buy-to-let flats bought over the past decade means that the choice of rented accommodation is huge.
Bills are also cheaper in rented accommodation, as you typically have no buildings insurance to pay and the landlord must pay the cost of any wear-and-tear maintenance.
The rent you pay could also be less than the mortgage payments on an equivalent flat.
The average price of a two bedroomed flat in Brentwood, Essex, based on properties advertised on property website Rightmove, is £180,000.
With a three per cent deposit the mortgage payments would be £1,107 a month on a 5.89 per cent two-year fixed rate repayment mortgage with Halifax. According to ARLA, rent would be £800-£1,000.
The figures are similar in Hull, where a two bedroom flat costs an average £150,000.
With a three per cent deposit, monthly mortgage repayments are £923 on the same deal as before but rental payments range between £350 and £750 a month.
The downside of renting, however, is that you do not get the capital growth that properties have seen over the years.
Peter Bolton King, chief executive of the National Association Of Estate Agents, said: “Property has offered a better return than most investments.
“The UK is also in an unusual position that it has a rising population and needs to provide more housing, which will keep up prices.”
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