A report by the Equity Release Council claims that owning your own home makes you considerably better off in the long term compared with renting. In their report called Home Advantage: intergenerational perspectives on property wealth in later life the Council looked at trends in pensions, mortgages and home ownership over the past 30 years. The trade body representing providers, financial advisers and solicitors in the equity release sector surveyed 5,000 UK adults, and compared the cost of renting privately with paying a mortgage for the average first-time buyer.
The report assumed annual rent rises of 2% per annum and compared this with a homeowner taking out a 95% mortgage on a property costing £220,000. Other costs such as maintenance were also factored in. The Council concludes that over a 30 year period owning your own property will make you £326,000 better off compared with renting an equivalent home. This is even before any increase in property values is taken into account.
The report found that 32% of those surveyed viewed their mortgage as an investment for their later life. Nearly half of those with a mortgage said that because of the extremely low interest rate on their loans they were able to save more of their income than they would if they were renting. Around 40% of respondents believed that having a mortgage in later life was now more acceptable, as opposed to rushing to pay off loans at the earliest opportunity. Over half of those questioned also said they would consider releasing equity from their property to spend on themselves or family members.
The Equity Release Council’s report suggests that owning a home is likely to become even more key to a family’s financial security and comfort in the future. However, it also cautioned against the inequality home ownership can generate in society for those unable to buy. Chairman of the Council David Burrows said: “For those who manage to buy their own home during their working lives, the extra confidence and flexibility this provides will be even more critical to their financial wellbeing than it is today.”
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Further Information
Equity Release Council Home Advantage Intergenerational Report
