Is renting cheaper?

Nordea recently released a statement suggesting that, with the rise in interest rates, home ownership has become more expensive than renting. The news circulated in the media as a sensational headline. But what does it actually mean in practice, and should you change your mindset about buying a home?

Let’s take a closer look at the matter.

Where does the comparison actually come from?

Nordea has a purpose for its release, and it doesn’t mean the figures are wrong. However, calculations usually compare the monthly mortgage payment to rent. This is where the problem lies.

A monthly mortgage payment consists of two completely different things: interest and principal repayment. Interest is an expense, yes. But the principal repayment is not an expense in the same sense. It is money you move from one pocket to another, from debt to your own wealth.

Rent, on the other hand, is an expense. Entirely. Every month.

A marginal change in the big picture

The rise in interest rates has been significant, and it has made buying a home more expensive for many in the short term. That is true. But it doesn’t mean that buying a home is a bad decision.

At the same time, the rental situation has developed in a contradictory way. In many areas, there is an oversupply of rental apartments, which has pushed rents down or kept them stagnant. On the other hand, property investors are facing growing maintenance fee pressure, and the largest landlords have already had to raise their rents as a result. Upward pressure exists, even if it isn’t visible everywhere yet.

So, the comparison looks different depending on the point in time and the area it is tied to.

Wealth accumulation is different from expenses

This is the point where you should really stop and think.

When you pay rent, you are building your landlord’s wealth. That is a simple fact. When you pay a mortgage, you pay interest to the bank, but at the same time, you are accumulating assets for yourself.

Over a ten-year period, the difference can be significant. Especially if the value of the property has risen even moderately. This doesn’t mean a home is always a better investment than renting and investing elsewhere. But it is a variable that many leave out of the comparison entirely.

A changed attitude toward mortgages

We have written before about how Finns’ attitudes toward mortgages have changed. Today, 44 percent of people consider a mortgage a risk. Understandable, when you remember what happened to Euribor in 2022–2023.

The risk is real. It should not be downplayed. But renting also carries risks that are easily left unmentioned in media discussions. A landlord can terminate the agreement. Rent can go up. The security of tenure is different.

Both options have their own risks. That is the starting point you should begin from, not which monthly payment is slightly more expensive right at this moment.

What should we make of this?

There is no straightforward answer. Situations vary. The city, life stage, your own financial buffer, and the planned duration of residence all affect which option is more sensible.

But you should be careful with how the comparison is made. The monthly payment doesn’t tell the whole story. And a headline saying that home ownership is more expensive than renting tells part of the truth at a specific moment, using a specific calculation method.

It doesn’t mean that renting is automatically more sensible for you.