Renting vs Buying in the UK (2026): Is Buying a House Still Worth It?

For decades, buying a house in the UK seemed like the obvious choice. But in 2026, the renting vs buying debate looks very different. With mortgage rates at 5-6% and house prices barely keeping up with inflation, is buying a house in the UK still worth it?

Today, that assumption deserves closer scrutiny. When we examine house price growth, inflation, mortgage costs, and transaction expenses, particularly in London and other major UK cities, the purely financial case for buying is far less robust than many people assume. And yet, many still choose to buy, often for reasons that go well beyond financial returns.

This article lays out both sides of the equation.

Renting vs buying in the UK: the real numbers

How much have UK house prices really grown?

UK house prices have grown over the long term, but the pace and reliability of that growth have changed significantly.

According to the ONS UK House Price Index, average nominal house price growth in the UK between 2010 and 2023 was roughly 3.2–3.5% per year, compared with closer to 6–7% per year in the 1990s and early 2000s. Once adjusted for inflation, real growth has been much lower, and in some regions close to zero.

The divergence is especially clear in London. Data from the ONS and Nationwide show that:

• London experienced strong growth between 2010 and 2016, averaging around 6–7% nominal, but from 2017 to 2023 nominal growth fell to roughly 1–2% per year, with several years of outright declines in real terms.

• Manchester and Birmingham performed better, with nominal growth closer to 4–5% annually over the same period, but even here real (inflation-adjusted) returns were modest.

• UK CPI inflation, according to the ONS, averaged approximately 2.8% per year from 2010–2020, and rose sharply to 6–9% in 2022–2023.

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In practical terms, this means that in many parts of the UK—particularly London—house prices have barely kept pace with inflation over the past decade.

Mortgage rates vs house prices: the 2026 reality

For much of the 2010s, ultra-low interest rates masked weak underlying returns. A 1.5–2% mortgage made even modest price appreciation look attractive.

That dynamic has reversed.

As of 2024–2025, typical UK mortgage rates for owner-occupiers have ranged between 4.5% and 6%, depending on term and loan-to-value. When expected nominal house price growth is closer to 2–4%, homeowners are often paying more in interest than they are earning in capital appreciation before accounting for maintenance or transaction costs.

From a purely financial perspective, this implies a negative carry: the cost of capital exceeds the expected return on the asset.

The hidden costs of buying a house UK

Buying a home in the UK involves substantial upfront costs that do not compound and are often under-modelled.

For a typical owner-occupier purchasing a £500,000 property in England:

• Stamp Duty Land Tax (SDLT): Approximately £12,500–£15,000, depending on thresholds and reliefs, equivalent to 2.5–3% of the purchase price (HMRC).

• Legal fees, surveys, and searches: Typically £2,000–£3,000 (0.4–0.6%).

• Mortgage arrangement and valuation fees: Around £1,000–£2,000 (0.2–0.4%).

  
  

When comparing renting vs buying in the UK, transaction costs alone can reach 3–5% of the property value on purchase, plus estate agent fees of 1–1.5% on sale. These costs materially reduce effective returns, particularly for buyers who move within 5–10 years.

Renting and investing: could it beat buying?

Capital tied up in a property deposit is capital that cannot be deployed elsewhere.

Historically, global equity markets have delivered 6–8% real returns over long periods. For higher earners with access to pensions and ISAs, renting while investing surplus capital can, in many scenarios, result in higher long-term net wealth, especially in low-growth housing markets.

When all costs are accounted for, buying a home is often better understood as a consumption decision with an embedded asset, rather than a high-return investment.

Why Buying Can Still Make Sense

Despite the numbers, many people continue to buy homes—and often rationally so.

The reason is that financial optimisation is not the same as life optimisation.

Why people still buy (even when the numbers don't add up)

In economics, utility refers to the satisfaction or well-being derived from a choice, not just its monetary payoff. As we explored in our earlier article on utility as the economic concept of happiness, decisions that appear financially sub-optimal can still maximise lifetime welfare when non-monetary benefits are included.

Homeownership can deliver forms of utility that renting cannot easily replicate.

Security of tenure is a major factor. Owning a home reduces exposure to rent increases, forced moves, and landlord decisions. For households with children or long-term location commitments, this stability has real value, even if it does not show up in a return calculation.

There is also an identity and autonomy component. The ability to customise a living space, plan long-term, and feel rooted in a community contributes to psychological well-being. These benefits are difficult to price, but they are nonetheless real.

Finally, for many people, a mortgage functions as a powerful behavioural tool. Regular repayments enforce a form of disciplined, long-term saving that some individuals struggle to replicate through voluntary investing. While this is not an efficient mechanism in theory, it can be effective in practice.

So, should you rent or buy in the UK?

The question, then, is not simply “Is buying a house a good investment?”.

A more accurate framing is:

Does the combination of financial return and personal utility justify the cost for this individual, at this stage of life?

For some (particularly mobile professionals in high-priced, low-growth markets) the answer may be no. For others, the stability, predictability, and psychological security of ownership may outweigh the weaker financial case.

The mistake is treating homeownership as a universal benchmark of financial success rather than a context-dependent choice.

Moola: How to decide what's right for you

At Moola, we believe financial decisions only make sense when viewed in the context of the individual making them.

Your income, risk tolerance, time horizon, and psychological preferences all shape whether buying, renting, or delaying is the right move. That’s why we focus not just on returns, but on how decisions affect long-term security, flexibility, and peace of mind.

Not sure whether to rent or buy? Use Moola's platform to simulate both scenarios and see how each choice affects your net worth over 10, 20, or 30 years.