How does it feel to be rent free? - Mortgages - News |

News News brings you the latest financial & economic news & reviews of the best products in the UK by our team of money experts.

How does it feel to be rent free?

How does it feel to be rent free?

Category: Mortgages

Updated: 12/05/2014
First Published: 12/05/2014

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Today is UK Rental Freedom Day! This means that if tenants had put everything they earned so far this year into their rental costs, they would have no more rent to pay for the rest of the year.

Sounds good, doesn't it? But that's until you hear that it comes a whole month later than when homeowners were celebrating Mortgage Freedom Day.

Research from Halifax shows that today, Monday 12 May – the 132nd day of the year – is how long tenants should have to work to earn enough to pay off the annual cost of their rent. Mortgage freedom day was, however, over a month earlier on 10 April.

Craig McKinlay, mortgage director at Halifax, commented: "Our research shows that today, if people had put everything they'd earned since the start of the year towards their rent, the average tenant would be rent free for the remainder of the year.

"Rental Freedom Day falls over a month after the equivalent day for homeowners due to the higher monthly costs of renting compared to the monthly cost of a mortgage. Once renting, it becomes even harder to save a deposit to buy a property but for those tenants who do want to own their own home, there are an increasing number of mortgages that require lower deposits now available to help support this."

There are, as always, regional differences and some parts of the country were celebrating even earlier, with the North East the first to achieve rental freedom on 8 April. London, however, will have to wait more than two months more, with their day falling on 5 July, over half way through the year.

Renting can have its advantages over the big commitment of buying a property, giving people the flexibility to move around with work, and often people can live in a much nicer house than they may be able to afford to actually buy. But in the long-run you are putting money into a landlord's pocket – a lot of it in fact - and you will never actually own your home.

With house prices rising, homeownership can sometimes feel like a distant dream but if you can manage to save up that deposit, then buying a property will usually work out beneficial. With current interest rates, buying a home often works out cheaper than the rental costs people are facing.

The first step in getting onto the property ladder is to save up a deposit. This can seem a fruitless task when you have such meagre amounts left at the end of the month. But remember, every little counts and a regular deposit, however small, will soon add up. You could also take a closer look at your lifestyle and see if there are areas in which you can cut back easily, such a packing up a lunch rather than buying it or having a night in rather than going out.

Once you have a suitable deposit saved up, take a look at some of the mortgages available and find a rate that is suitable for you. Thanks to the Government's Help to Buy scheme there are now many 95% mortgages available for the first-time buyer with a small deposit, so hopefully many more people can have the opportunity to get onto the property ladder.

You will also want to consider whether to fix your rate or not. If you opt for a fixed rate, it is likely to be more expensive in the initial instance, but you can enjoy the added security that if rates go up you will still be able to afford your payments. If however, you are in a more secure position and want to opt for a standard variable rate you may find this to be cheaper initially, but just ensure that if there is a rate hike that you can still afford it. The new MMR rules should also assist you with affordability tests to make sure you can manage the debt you take on.

So, if you dream of owning your own home, it doesn't have to be out of reach. If you get committed to saving that deposit and seeking out the best mortgage deals you could soon be celebrating Mortgage Freedom day a month earlier than those who rent their homes.

What Next?

Find the best mortgage deals with our whole of market search

Moneyfacts Mortgage True Cost Index

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.