Matt Coulson has explained why
Renting can sometimes look like the cheaper option compared with buying a home, particularly when mortgage rates are high and would-be buyers are facing large monthly repayments. But focusing purely on what comes out of your bank account each month could mean overlooking the much bigger financial picture, according to mortgage expert Matt Coulson.
The founder of Rickmansworth-based Heron Financial Ltd said one of the biggest mistakes people made when comparing renting with buying is thinking too much about the short term. With a mortgage often representing someone’s biggest monthly outgoing, Coulson said he understood why people obsessed over whether they could rent a similar property for less.
However, he argued that buying a home should be viewed over decades rather than months and that the benefits of eventually owning a property outright could fundamentally change someone’s financial position later in life.
Coulson said: “People have become very short-termist when it comes to buying a home. I understand why, because it is emotive and for most people their mortgage is going to be their biggest outgoing every month. But if you simply compare the rent on a property today with the mortgage payment on that same property today, you’re potentially missing the point.
“Rent is an ongoing cost. With a mortgage, you are buying an asset and gradually paying down what you owe. If you eventually repay that mortgage, you can reach a point where you own your home outright.
“That becomes particularly important as you approach retirement. Someone who owns their home without a mortgage is in a very different position from somebody who still needs to find rent every month from their pension income.”
Coulson also believes renters need to consider how little control they have over their future housing costs. Rents have risen sharply in many parts of Britain in recent years and tenants can find themselves facing higher costs even if their own financial circumstances have not changed.
He added: “When you’re renting, ultimately you’re at the whim of what happens in the rental market and, to an extent, your landlord. You don’t know what your rent is going to look like in five, 10 or 20 years.
“That doesn’t mean everyone should rush out and buy a property tomorrow. There are people for whom renting makes complete sense, and there are plenty of people who simply aren’t in a position to buy yet.
“But I would challenge the idea that renting is automatically the clever financial decision simply because the monthly payment happens to be lower today. Buying a home is a long-term decision and you have to look at it that way. You’re not just asking what costs less this month. You’re asking where you want to be financially in 20 or 30 years.”
Coulson said aspiring homeowners should therefore avoid becoming fixated on finding the perfect moment to enter the market.
He added: “There will always be a reason to wait. House prices might fall, mortgage rates might come down or something else might change.
“The problem is that while you’re waiting for everything to become perfect, you’re still paying rent. For somebody who wants the security of owning their own home and can comfortably afford it, that long-term picture matters far more than trying to perfectly time the market.”
