New research from Mortgage Advice Bureau (MAB), the UK’s leading mortgage intermediary with more than 2,000 advisers, reveals that renters in London could miss out on £546,110 in potential wealth creation over a 30-year period by renting rather than buying – the second highest amount across UK cities.
Only Bristol has higher (£573,110) and Manchester (£428,223) is third, meanwhile the UK average is £338,170.
The missed opportunity in Bristol is the greatest due to there being a larger gap between average rent and mortgage payments in the city, meaning homeowners start to see savings much earlier.
Financial opportunity
While renting may feel safer and more flexible in the short-term, the long-term financial trade off can be significant. MAB’s research shows that by year 6, homeowners start to save money versus renting – around £1,179, which if invested into a FTSE 100 tracker fund, could grow to £1,238, or £0.57 per day.
As the rent-mortgage gap widens, with rent increasing and mortgage payments remaining relatively fixed, the benefits accelerate:
- Year 14: Invested savings could reach £49,910 – enough to repay the average student loan debt in England
- Year 17: Savings could grow to £91,663 – recouping the average first-time buyer deposit in London
Over a full 30-year period, homeowners could save £319,493 in housing costs alone. If invested gradually, this could generate an additional £227,040 in returns, taking the total missed opportunity to £546,533.
Aspirations vs affordability
Despite the financial benefits of homeownership, many renters still believe it’s out of reach. While 65% of renters say they aspire to buy a home, 27% believe they’ll never be able to afford it. Only 8% said they prefer the flexibility of renting.
Encouragingly, only 7% of 18-24 year-olds and 11% of 25-34 year-olds say they think homeownership is beyond reach – showing optimism among younger renters. But this drops sharply with age: 56% of renters aged 55+ believe they’ll never own a home. Still, 64% of all renters agree that buying a home is more financially secure in the long-term.
Barriers to buying
The most commonly cited barriers to homeownership are:
- High property prices (61%)
- Saving for a deposit (56%)
- Job or income insecurity (32%)
- Mortgage eligibility concerns (31%)
- Lack of understanding of the process (17%)
However, many of these barriers may be less fixed than they appear, as just 10% of respondents said they would always prefer to rent. Over half (56%) would consider buying if mortgage repayments matched their rent and over a quarter (28%) said it would depend on other costs.
Many lenders now offer mortgages with deposits as low as 5-10%. Some even offer 100% mortgage options, helping more renters take that first step. Additionally, products such as Shared Ownership, Joint Borrower Sole Proprietor (JBSP) mortgages, and first time buyer incentives can ease affordability pressures. We’re now seeing a real focus on making buying a first home more achievable, and many renters won’t be aware of how much things have changed in the last year or two.
Affordability changes also mean an average buyer who could have borrowed £200,000 a few months ago could now borrow as much as £240,000. For some renters, this could mean they don’t have to save as long for a deposit as they may have predicted. Therefore, buying their first home could become a reality, rather than something in the distant future.
With the support of a mortgage adviser, prospective homebuyers can be guided through the various options available and gain an understanding of exactly how much they could borrow based on their financial situation.
Renters may already be close
The average time taken to save for a deposit among homeowners was just 2.84 years. In contrast, the average renter has been renting for 7.43 years – suggesting many long-term renters may have already had the time to save and buy, but haven’t acted.
In fact, 12% of homeowners didn’t save at all, receiving gifted deposits – a reminder that support options exist for many first-time buyers (albeit a fortunate minority).
Ben Thompson, Deputy CEO at Mortgage Advice Bureau, said, “Our research reveals that many renters are much closer to buying than they realise, despite the barriers they perceive.
Conditions for aspiring first time buyers have improved considerably over the last year or so. In fact, there’s a real industry push to see what innovation can be brought to the market, meaning that taking that first step could be far easier than it has been for the last decade or more.
“We welcome and support this, believing it will create a fairer society and ensure that homeownership is now a possibility for more people. With the right information, guidance, and support, the dream of homeownership is achievable – along with the significant financial opportunities that come with it.
“It’s also possible to borrow quite a lot more now than last year. Therefore, it may well be likely that you can buy your first home much sooner than you think. With the FCA also considering changes to responsible lending rules, providing more flexibility for consumers and helping more people get onto the property ladder, now is the time to discuss your options with a mortgage adviser.
“Acting now can lead to many thousands of pounds in long-term savings and investment growth. Homeownership builds equity, offers stability, and creates a foundation for future wealth. We strongly encourage renters to speak to one of our advisers to explore their options and take the first step toward owning a home – and their financial future.”
Leave a Comment