According to research from Yorkshire Building Society, which compared renting versus buying a home over the 55-year period from 33 to 88, a borrower would pay £367,000 in mortgage payments while a renter would shell out £1.6m in rent.

However, the borrower would own a property worth around £1.7m by the end of the period, while a renter would not have a property asset.

The mutual added that around £960,000 of the renter’s £2.6m additional spend would be from continued rental payments over the 20 years after retiring at 68, but the buyer would not have additional accommodation costs.

The buyer would also have options to release capital from their home to support their retirement or pass wealth onto family or friends.

 

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More people unsure if they want to buy a home

Further research from Yorkshire Building Society found that around a fifth of 18 to 34-year-olds and three fifths of those aged 35 to 54 are uncertain if they will ever buy a home or are not planning to do so at all.

When asked what barriers were preventing prospective first-time buyers from getting on the property ladder, the level of financial commitment of a house, affordability and high cost of living were cited as key factors.

Just under half said the cost of living was preventing them buying their first home and 43% said they were delaying a house purchase due to high prices.

Around half said they felt overwhelmed by the current market, so they have stopped looking for a property to buy.

 

Over half of prospective home buyers don’t want to waste money on rent

According to research on 1,000 prospective first-time buyers looking to buy in the next three years, more than half of people said they wanted to buy to not waste money on rent. This was most popular reason among the 35 to 44 and 45 to 54 age brackets at 64% and 67% respectively.

Respondents also pointed to freedom to live how they like, wanting to start a family and added security retirement.

Approximately 69% said they would consider extending their mortgage term to make it more affordable and 83% said they would try and pay off a lump sum to make the mortgage more affordable.

Around 37% of prospective first-time buyers said housing and house prices were third on their list for national priorities, behind the economy and health and the NHS. It is also behind immigration, crime, environment, terrorism and defence.

 

Research shows ‘potential loss of faith in the idea of homeownership’

Ben Merritt, Yorkshire Building Society’s director of mortgages, said the latest research were the “most stark yet, pointing to a potential loss of faith in the idea of homeownership”.

He continued: “That – coupled with our lifetime analysis of what this means for anyone who has to settle for long-term renting – shows just how big an issue this is for the UK right now, which our respondents have seconded in the priority they have assigned to housing.”

Merritt said that the mutual was set up to “help ordinary people own their own homes” and it was “doing everything we can to champion the right to homeownership”, pointing to its £5k Deposit Mortgage product in launched in March.

“We are also preparing to raise this issue in government through a policy paper and Parliamentary event calling for a joined-up industry approach to fixing what is wrong with the housing market, involving lenders, the government and other industry bodies.

“We believe homeownership is a basic right which gives people access to a range of other life essentials, and this is why we will continue doing our bit to push for it to remain available to as many people as possible,” he added.

Merritt said that it was “obviously a worrying situation for first-time buyers” but it wanted them to “feel encouraged that there are solutions out there for them and if more industry players can galvanise behind this issue and give borrowers hope, they can see how compelling a prospect property still is as an asset”.

“With a little help – homeownership really is still worth the effort. And with innovative products like our £5k Deposit Mortgage, they could turn just £5,000 into a nest egg worth £1.7m,” he concluded.

 

Strong private rental sector and regulatory changes will help more people buy a home

Jeremy Duncombe, director of mortgage distribution at Yorkshire Building Society and managing director at Accord Mortgages, added that it was also really important to consider how to foster a strong private rental sector.

He explained: “This does highlight that not everybody either want to or can buy a house, so we need to make sure we’re have a really strong private rented sector and continually landlords to cough up and making things less viable for them.

“You are forcing landlords out of the market, which isn’t helpful for people who want to rent or can’t buy, they need affordable properties to allow them to hopefully save up at the same time.”

Duncombe agreed that from a lender’s perspective there was a need for “more products”, “more innovation” and “more support” and additional support was needed from the government.

He noted that Yorkshire Building Society had called on the government for more first-time buyer products to help with affordability and lobbied for a version of Help to Buy to come back that would not just focus on new build.

“If you could do it [Help to Buy] across all property types, not just new build, I think that would help, and it would also maybe help people with selling their properties, or choosing to put a house on the market, which would create more supply, and then through an affordability point of view.”

Duncombe added that the rate environment over the last few years had meant that lenders had to stress test at higher rates of 7% to 8%, and while this had been prudent in a rising rate environment and protected borrowers from going beyond their means, this could create an “affordability challenge”.

“There is a view that, certainly over the short to medium to long term, rates are going to stay in a corridor of between sort of 3.5% and 5% so as long as we’re stressing around about those levels, we’re still having to stress at probably 8% currently, which is, again, an affordability challenge for borrowers, so there’s a question there of can we do more from a regulation point of view.”

He said from a regulation perspective, he was not saying there would have to be “massive changes” but there should be a “discussion about the value to the wider economy”.

“We have to keep people safe, but we also need to acknowledge that wealth gap, and if we’re saying to people you’ve got to rent for the next six or seven years, we’re creating a problem. The earlier we can get people onto a housing ladder affordably, the better it will be both the individual and for the country,” Duncombe added.