Renters in England could miss out on £338,170 in potential wealth creation over three decades by continuing to rent rather than buying a home, research from Mortgage Advice Bureau (MAB) has revealed.
By comparing the average cost of renting versus buying over time, MAB’s findings showed that homeownership not only builds equity, but also presents a long-term investment growth 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 showed that by year two, homeowners start to save money versus renting – around £99, which if, for example, they chose to invest into a FTSE 100 tracker fund, is boosted to £104 (equating to £0.14 saved per day).
As the gap between the cost of renting and owning a home rises (i.e. annual rent payments rise, but mortgage payments remain fixed), by year 10, homeowners could save up to £12,157 compared to renters.
If they opted to invest this amount, that sum could grow to £14,358, generating an additional gain of £2,202.
By year 14, those invested savings could reach £39,539 – enough to fully recoup a typical first-time buyer deposit.
Following the same logic, by year 16, invested savings could grow to £55,547 – enough, for example, to repay the average student loan debt in England.
Over a full 30-year period, homeowners could save £206,031 in housing costs alone, not including house price appreciation.
If these savings were gradually invested over time, they could yield an additional £132,139, taking the total missed financial opportunity for renters to £338,170.
In some cities, the gap is even wider.
In London, the missed opportunity rises to £540,687 – or nearly £50 per day.
In Bristol, renters could miss out on even more (£573,110), while in Manchester, the figure reaches £428,223.
Interestingly, buyers could save more in Bristol than in London. As the monthly difference between rent and mortgage payments is much greater in Bristol, homeowners there see bigger savings earlier on.
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 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.”
Thompson added: “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.”
