Why rent when you can buy? - Tim Betts, Taylor Wimpey

Why rent when you can buy?

Resolve to be bold this New Year as fortune favours first-time buyers

With confidence rising high in the housing market, first-time buyers need to act early in 2010, and make this the year they stop wasting money on rent and invest in a brand new place of their own.

Easier said than done? Not really. Our independent financial advisors speak to a great many people who are renting or living with parents, and one of the more common misconceptions is that they ‘can’t afford to buy’.

Let’s look at the figures. In December 2009 the average monthly rent spent on homes in the UK was £723 according to the Residential Rental Price Index, while those renting a typical two-bedroom home spent just shy of £500 per month.

Thanks to competition among lenders, for around £500 a month first-time buyers could be making comfortable payments on a £140,000 interest-only mortgage at a 4% rate.

While mortgage lending rates favour those borrowing up to 75% of the value of the property, this ‘loan to value’ ratio has become more flexible, and 85% and even 90% mortgages are out there for first-time buyers. However, expect to be charged a higher interest rate for borrowing into the 75-90% zone, with bigger monthly repayments to match.

Meanwhile, housebuilders such as Taylor Wimpey are taking the sting out of stepping onto the property ladder by offering incentives to first-time buyers which take into account the fact that not everyone has a 25% deposit sitting in the bank.

For example, the government-backed HomeBuy Direct scheme is available on selected homes at a choice of Taylor Wimpey developments across the UK, and enables purchasers with a household income of less than £60,000 a year to purchase a brand new home with a mortgage for as little as 70% of the full price.

The outstanding 30% is covered by a loan which is interest free for the first five years and then capped at a low interest rate for 25 years.

The beauty of a scheme like this is that you can own your home outright and straight away, without having to find a hefty deposit – and with each monthly payment certainly a welcome alternative to renting.

With the Bank of England interest rates at a record low and competition between lenders to offer the best mortgage deals, home-owners are enjoying savings of around £200 a month on their mortgages and clued-up first-time buyers are joining them at the right time.

Combined with comparatively low property prices which are rising steadily each month, this is an excellent time to be bold and escape the stranglehold of renting.

After all, Taylor Wimpey offers free independent financial advice for potential purchasers at its new homes developments, meaning those who are renting have nothing to lose by finding out how much they could be paying for a home they actually own.

Tim Betts

Tim Betts is Sales and Marketing Director for Taylor Wimpey West London, which has new homes developments in Berkshire, Buckinghamshire, Hampshire, Middlesex and Surrey. www.taylorwimpey.co.uk