Whether You’re a Renter or a Buyer, Living in Britain Isn’t Cheap

There are many good reasons to buy a house, one being that it is becoming ever more expensive to be a renter. According to the Association of Residential Lettings Agents, first-time buyers looking to purchase a house in 2017 will have already spent an average of £52,900 on rent – a cost that will add up to about £64,400 by the time they actually buy their house. Of course the amount will vary according to region, with costs higher in London and the South East of England, but it is no trivial amount, no matter where you hang your hat.

All of that money paid to someone else month after month, year after year, can hardly be considered an investment. At the end of two, five, ten years or more, what have you to show for it but rent receipts? With that in mind, then, is it better to buy now? There’s no easy answer, particularly in light of the fact that house prices are also on the rise. But a little perspective is in order, as well as a reminder that the government is extending a helping hand to some prospective homebuyers.

House prices and rents just keep getting higher

The cost of renting a home is rising faster than the general cost of living, according to official figures released by the government in late January 2017. As the economy has rebounded somewhat from the financial meltdown and prospective buyers with good credit history have found lenders more amenable to entering mortgage agreements, home sales have risen sharply. As a result, properties have been getting snatched up quickly, and the available supply of houses is falling short of demand, causing prices to rise significantly. It follows that those higher-priced houses that are being purchased to let are commanding higher rent prices just to cover mortgage payments. As rental prices continue to soar, more and more people who had previously been renters are looking to purchase. Their incentive is two-fold, in that they hope to save a bit on monthly payments while building equity rather than paying a lot of money with no hope of returns.

There remain some areas where rents and purchase prices have yet to rise so dramatically, but these are usually located in less-popular regions that either lack the transportation options needed by commuters or lack the qualities sought after by rural buyers. The lack of affordable housing – a product of the immutable law of supply and demand – is a problem across the board, regardless of whether you’re a renter or a buyer, a committed city dweller or a fan of the slower pace in a country village.

“We’re from the government and we’re here to help…”

With apologies to the late US President Ronald Reagan, governments do on occasion get things right, and to its credit our own government is trying to address the housing crisis in Britain. One government scheme worth considering is the help-to-buy Isa (Individual Savings Account). Launched in December 2015, the programme can give couples who are trying to get on the property ladder a tax-free bonus of up to £6,000, with interest rates of up to 4%. Currently the money raised can only be used for a first-time buyer purchasing residential property worth up to £450,000 in London, or up to £250,000 elsewhere.

A help-to-buy Isa can be used as a general savings account, so if the money is needed for something else besides a home purchase it can be withdrawn. It can also be used in conjunction with other schemes such as help-to-buy equity loans, mortgage guarantee schemes and shared ownership schemes.

The help-to-buy Isa is part of a larger government scheme that was first introduced in 2013, as a response to the fact that increased deposit requirements had left many hardworking renters unable to get onto the housing ladder. More details on how the Isa programme works are available on the government website.

There’s little doubt that Britain is facing a housing crisis, and it remains to be seen if government programmes and policies will be able to adequately address the situation in the years to come. Clearly these schemes are a work in progress, but at least there is some help available now for people struggling to realise the dream of home ownership.

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