Renting vs buying: Should I get a mortgage?

According to the HomeOwners Alliance, 86% of people in Britain want to own their own home.

But with house prices rising and a jump in mortgage rates over the last few years, becoming a first-time buyer is prohibitively expensive for many.

There’s also the responsibility of taking on a long-term loan. Are there any instances when renting is actually the better option?

We take a look at the pros and cons of renting vs buying below.

What are the advantages of buying a house?

There are clearly many more factors other than cost that will determine the best option for you.

Here are the main upsides of home ownership.

• Security: You can’t be made to move out at short notice by a landlord.
• Freedom: You don’t have to stick to a tenancy agreement that sets out what you can and cannot do, and you can decorate and furnish your home exactly to your taste and make structural modifications to enhance its value.
• It’s an investment in your future: Instead of paying rent that pays off your landlord’s mortgage, your monthly payments will be contributing towards something that is yours. In the long-term, you could use the equity from your home to buy a bigger house as your circumstances change or downsize to fund your retirement. For many people, the most money they make in their lives is from the rising value of their home.
• Control: With a fixed-rate mortgage, you can control your costs more easily than being at the whim of a landlord who may suddenly put your rent up.

What are the disadvantages of buying a house?

For all that home ownership is an ambition for so many of us, there are significant drawbacks to it as well:

• It’s a big financial commitment: As well as having to save for a deposit (a 10% deposit on a £250,000 home is a whopping £25,000), you’ll have to be sure you can meet the monthly mortgage payments. If you stretch your budget when you buy, you might not have money for treats such as meals out and holidays. And, if your financial circumstances change – for example, if you lose your job or interest rates rise – and you struggle to pay your mortgage, your home could be repossessed, which can also affect your access to credit in the future.
• The property market can change: While the overall trend for property is that it rises in value over the long-term, it’s a volatile market. If prices take a tumble, you might end up with ‘negative equity’, where your home is worth less than your mortgage, making it very difficult to sell.
• Additional costs: You’ll need extra insurance to cover buildings as well as contents and term life insurance to protect your mortgage if something happens to you. The costs of maintaining your home – such as fixing the roof or repairing the boiler – will all have to be met by you as the homeowner.
• Less flexibility: Selling up and moving is more expensive when you own a home than when you’re renting as you have estate agency and legal fees to pay. If you’re living with someone and split up, deciding what to do with the property can be complicated and costly.

What are the advantages of renting?

Now let’s see the areas where renting a home may be a better fit for some people’s lifestyles.

• Flexibility: Most rental contracts are 12-months long, which means that If you change jobs or just want to try living in a different area, it’s easier to move quickly. If you lose your job, you can give your landlord notice, walk away and rent something smaller or move in with family or friends temporarily.
• Maintenance is not your responsibility: When you live in rented accommodation, and there’s something wrong such as a broken shower or a mysterious leak under the sink, you just have to contact the landlord to sort it out.
• Budgeting is easier: You know what your rent will be each month and, if your landlord manages your utilities for you too, you know what your electric, water and other household bills will be and how much disposable income you have to spend on doing the things you enjoy.
• Location, location, location: Some of the UK’s most desirable locations are out of reach for most home buyers, whereas renting enables you to live in more sought-after areas. For example, if you fancy London’s trendy Bethnal Green, the average price for a two-bedroom house is an eye-watering £649,077. For comparison, renting a two-bed property there costs around £1,848 a month. And though this may work out as more than your mortgage repayments might be, you wouldn’t need to find the huge deposit that you’d also need to buy a property there.

What are the disadvantages of renting?

It’s no secret that there are plenty of downsides to renting, but let’s run through them anyway in order to make a clear comparison.

• You’re paying your landlord’s mortgage rather than your own: Every month’s rent payment goes to your landlord rather than being used to help you become a homeowner yourself and building up a potential nest egg for your future.
• You have to abide by the tenancy rules: There are likely to be restrictions on things such as owning pets or modifying the property.
• Your rent can go up on the whim of your landlord: Your monthly rent can be subject to sudden increases, which could unexpectedly impact your monthly budgeting.
• Insecurity: When your tenancy comes to an end, your landlord may not carry you over on to the next lease or may suddenly decide to sell the property. Either way, you may have to quickly find somewhere else to live.

Learn more: can I challenge a rent increase?

Is it cheaper to rent or buy?

In the short term, renting can be cheaper as, in addition to your deposit, fees, and surveys, there are some extra costs you’ll have as a homeowner, such as buildings and life insurance and property maintenance, which you don’t have when renting.

However, when interest rates are low (which they currently aren’t), and if you have a big deposit, homeownership can prove cheaper than renting in terms of monthly repayments.

You’ll also have the added benefit of owning an asset that should steadily rise in value over time.

Given the current average house price of £277,000 in the UK, along with a 10% deposit of £27,700, you'll need to consider additional costs such as mortgage fees, valuation fees, survey costs, conveyancing fees, and removal costs.

It's also important to factor in expenses like stamp duty, insurance, and property maintenance. The overall cost to buy your own home, including all these factors, averages £33,070, though this may vary depending on the location and size of the home.

Then, you’ll have to find around £1,457 a month, based on a 25-year repayment mortgage at 5%. If interest rates rise by 1%, this will increase to around £1,606 a month.

The Office for National Statistics (ONS) calculates the average monthly rent in England was £1,319 in July 2024, reflecting an 8.6% increase from the previous year, although this varies significantly from region to region.

Unsurprisingly, London had the highest average monthly rent at over £2,000, while the North East had the lowest average monthly rent at £669.

When renting, you’ll normally be required to pay one to two month’s rent in advance, along with a tenancy deposit, which must be no more than five weeks’ rent.

In summary, buying requires a higher upfront cost, but renting is more expensive in the long term.

A good rule of thumb is that buying a property becomes better value after around 10 years, compared to renting an identical property.

Whether it’s cheaper to buy or rent depends on several factors.

If you decide you’d like to buy, the best way to find the right mortgage deal for you is to use an independent mortgage broker who has access to the whole of the mortgage market and can maximise your chances of a successful application.

Get expert financial advice

Deciding whether to rent or buy, and consequently whether to get a mortgage, depends on your financial situation, lifestyle, and future plans.

While getting a mortgage and buying a home can provide long-term stability and the opportunity to build equity, it requires a significant upfront investment and a long-term financial commitment. 

Renting, on the other hand, offers more flexibility and less responsibility, but without the financial benefits that come with owning a home.

Unbiased can quickly match you with a qualified mortgage broker who can help you navigate the complexities of securing the right mortgage deal so that you can make an informed decision about whether buying a home is best for you.