"Buying beats renting by almost £200,000 over lifetime"

Here's the original Barclays press release which has been re-hashed by most newspapers over the past two days:

Stepping onto the property ladder has enormous financial benefits over a person's adult lifetime. According to a new study from Barclays, owning your home rather than renting it will save you £194,000 over a fifty year period. And this figure doesn't even account for the value of the home the buyer will own at the end of it.

While the total cost of mortgage repayments, maintenance, and other costs associated with owning the average home would come to £429,000 over fifty years (a person's adult lifetime since a typical buyer purchases in his early thirties) renting a similar home over the same period would cost £623,000. Recognising that getting on the housing ladder, or trading up is still a substantial barrier to many, Barclays has created a new mortgage scheme (Helpful Start) which has a Family Affordability Plan incorporated into it, that lets parents help their children with loan affordability...

"Well, they would say that, wouldn't they?" you might think, but at least they explain why:

Over a fifty year span, roughly 50 per cent of the cost of occupying your own home comes in the form of mortgage payments - £210,000 out of the £429,000. Two fifths of that £210,000 is interest cost, while the rest is capital repayment. The next largest outlay is maintenance at £170,000. The initial purchase deposit is the next biggest cost, while insurance, stamp duty and other costs associated with buying the house in the first place make up the rest.

Yup, you "save" £194,000 and the bank earns £84,000 interest, of which it pays half to depositors and the rest is pure profit. Fag packet says £129,000 x 2% margin (rent) x 25 years, minus a third because mortgages are reducing balance = £43,000.

Only the "saving" is nowhere near what they claim, is it? They explain their assumptions (rents rise by 2% inflation and the tenant earns interest on the money he would have used as a deposit etc) and the total figure of £623,000 spent over the next fifty years looks about right - but they do not then discount this figure backwards to give the net present value. If you discount these payments backwards at Barclays' assumed savings rate net of tax (for want of a better discount rate), the total cost of renting in today's money is £310,000 and the total cost of buying is £277,000.

In relative terms, buying is more expensive because payments are front loaded, at a time when you might have other things to spend money on, like having children etc. For completeness; if you use a higher discount rate of 3.8%, the cash cost is exactly the same for renting and buying.

So there's not that much difference in the cash cost, the difference is that you will (hopefully) end up with a mortgage-free house*, the value of which will almost certainly have gone up faster than inflation and probably faster than wages. But I see no great urgency to "step onto the property ladder".

* Or maybe not.