The quarterly index reveals that over six million would rather rent than buy and nearly half (47%) of those who would rather rent are ‘mortgage-phobic’ – nervous of getting onto the housing ladder because they fear the actual cost of a mortgage.
Broken down further, nearly one in five (17%) of those who prefer renting feel a mortgage is too much of a commitment. Another third (30%) say a mortgage is too expensive and feel they would be unable to afford their own property.
Stephen Leonard, Director of Mortgages at Alliance & Leicester, said: "It seems the cost of a mortgage is the main reason why many people choose to stay off the property ladder. Of those who would rather rent, nearly half think a mortgage is too expensive or too much of a commitment. People are afraid that mortgages are unaffordable but the reality is that even though a mortgage is a financial responsibility, it needn’t be a burden if people get the right deal to suit their circumstances.
"There is good news for these ‘mortgage-phobes’ - the mortgage market is becoming increasingly competitive and borrowers can take advantage of the increased rivalry between lenders to provide the best products and rates."
"At Alliance & Leicester we take great care to ensure that every borrower can realistically afford the repayments – including if they were to go up – before lending the money.
"Many lenders, including Alliance & Leicester, now base their lending decisions on affordability - an applicant’s ability to afford a mortgage - rather than on traditional income multiples which should reassure people and give additional peace of mind. We view this as a more responsible method of lending money which can minimise the risk of over-indebtedness. "
‘Mortgage-phobia’ is most rife in the South-West where 64 per cent of those who would rather rent are afraid a mortgage is too much of a commitment and too expensive. Over half (53%) of those in their 20s are also concerned for the same reason.
Those least likely to suffer from ‘mortgage-phobia’ live in the North-East. They overwhelmingly cite that renting has nothing to do with their fear of getting a mortgage, but rather, it is a lifestyle choice (56%). Surprisingly, this is more than double when compared with those that rent in London (27%). This suggests that people in the North value the flexibility of renting more than those in the South. Those in their 30s are the least ‘mortgage-phobic’ (38%).
Whilst ‘mortgage-phobia’ afflicts half of those who prefer renting the majority of people still want their own castle. Eight out of ten people (84%) would still rather buy than rent their home. Over a third (34%) of those who prefer to buy say that renting is money down the drain and another third (34%) see owning their own home as an investment and want to make money from property.
Despite being neighbouring areas of the UK, half of those from Yorkshire and Humberside who prefer buying (50%), say they want to make money from property compared with 25 per cent in the North West.
Leonard continued: "Despite ‘mortgage phobia’, our research shows that the majority of people in the UK would be happier to call a home their own, rather than to rent from a landlord. Renting is regarded by many as money down the drain and it seems people would rather have their hard-earned cash go towards eventually owning their home, rather than going in someone else’s pocket."
The need to be accepted in society has led over three million people** to think that owning a house will enhance their status and image in society.
The research also showed that those who already own their homes are convinced they have made the right decision – given the choice, nearly all of them (97%) would still rather buy their own home, than rent.
Leonard continued: "Those who have already taken the plunge and bought their properties, seem happiest with their choice."
Other findings reveal:
- Just under a third (29%) of those who would rather rent like the flexibility of renting compared with the commitment of a mortgage
- Over four in ten (42%) of those in their 20s say they would prefer to rent rather than buy, because they cannot afford a mortgage
- Nearly a fifth (19%) of those in their 30s seem to be timing the market. They say they would prefer to rent, than buy, because they would like to wait for house prices to fall.
