It’s cheaper to buy than rent

The average monthly costs associated with buying a three bedroom house stood at £6721 in June 2013; £73 (or 10%) lower than the typical monthly rent of £745 paid on the same property type. The percentage difference between the monthly cost of buying and renting has fallen marginally from a year earlier.

Five years ago renting was considerably financially more attractive than buying. In June 2008 the average monthly cost associated with home buying was £352 (49%) higher than renting – equivalent to an annual cost difference of £4,226. The substantial improvement in the affordability of buying relative to renting since 2008 largely reflects a 37% decline in home buying costs over the past five years.

Both lower house prices and mortgage rates have contributed to making home buying more affordable. The average mortgage rate for a new borrower has fallen by 2.31% over the past five years from 5.88% in June 2008 to 3.57% in June 2013. The average house price has fallen by 13% over the same period. The typical rent paid, however, has increased by 13% (£88) since June 2010.

Buying a house is more affordable than renting in all but two regions in the UK.

Average monthly buying costs in both Yorkshire and the Humber and Wales are marginally higher (1%) than average monthly rental costs. On the other hand, buying is most affordable compared to renting in percentage terms in Northern Ireland where the typical homebuyer paying 11% (£47) a month less than the average renter (£369 against £415). In cash terms, the average monthly cost of buying in London is £98 lower than renting.

Despite the improvements in mortgage affordability, the number of buyers in the UK housing market in the twelve months to June 2013 was 44% lower (959,770) than in the same period in 2008 (1,711,000). However, there are signs of increasing market activity, with the number of home buyers rising by 3% compared to the same period in 2012.

The recent Halifax housing confidence survey shows that sentiment regarding the housing market has improved markedly in recent months. This increase in optimism is partly due to house prices picking up so far in 2013. However, the survey shows that worries over job security and raising a deposit remain key obstacles to market activity. The average deposit put down by homebuyers has grown to £40,628 in June 2013, up from £38,893 a year earlier.

Martin Ellis, housing economist at Halifax, said: "A combination of lower mortgage rates and declining house prices has substantially reduced the cost of buying over the past six years. Nevertheless, the number of home buyers in the twelve months to June 2013 was nearly half of that in 2008, which will have been constrained by worries over job security.

“We understand that building a deposit is still a key challenge for those looking to get on the ladder, although once this has been achieved, buying is much more affordable. Whilst optimism in the housing market has improved in recent months these factors remain key obstacles to home purchases.”

Five out of ten businesses would die out

Over half of businesses would not survive loss of key personnel as protection decreases and liabilities rise.

More than half of companies (55%) would cease trading if they lost one or more key people to illness, long-term incapacity or death, yet just one in five companies have insurance in place to protect against such a loss, according to the latest research from Scottish Widows.

At the same time, over three quarters (77%) of respondents report that there is at least one employee in their organisation whose loss through death, critical illness or long term incapacity would seriously impact the profitability or survival of the business.

This worrying trend is set against a rise in the number of companies with liabilities (such as business loans, mortgages and overdrafts) from 34% to 42% in two years, coupled with a small increase in the number firms from 32% to 34% with liabilities but no financial plans in place should they lose a key person.

Businesses in the UK are operating in an uncertain economic environment and owners and directors are focusing on day-to-day challenges. Nearly 70% of companies identified ‘delivering on commitments and promises to customers' as the most important aspect of their business and top of the list for 32% of firms was the need to cover their fixed overheads.

In contrast, insuring against the death of a key person was picked out by just 3% as their biggest priority. The results were almost identical when it came to insuring against a key person suffering a critical illness or long-term incapacity.

Almost three quarters of respondents to the Scottish Widows Business Protection Report are an owner, founder, partner or all three of the company. With such small teams predominant within this business demographic, the loss, either temporary or permanent, of just one member of staff can have an overwhelming impact on an organisation's ability to operate and maintain continuity of business. Many firms feel the likelihood of such an eventuality is relatively low, however, of the 14% that have been impacted, 44% said they suffered a loss of revenue and 55% were affected by the loss of expertise.

Katya MacLean, head of Bancassurance Enablement and Protection, said: "Attracting customers and keeping them happy should always be a company's priority, likewise insuring premises and the equipment that keeps it going. However, while business protection insurance for staff is rarely a priority, its absence can be the biggest single risk to the profitability and even the very existence of a business.

"Businesses need to strike a balance with their priorities. They can survive without a photocopier, for example, for a short period but the majority would be in far greater difficulty in both the short and long-term if they were to lose one or more of their key employees.

"Companies need to look carefully at succession planning and all the risks posed to a business regardless of how likely they are to happen to ensure they can continue to meet what they consider their key business priorities, whatever the eventuality."

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