Renting a home is now cheaper than buying in most parts of Britain for the first time since 2014

15 June 2021

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Property prices continue to soar due to the high demand from prospective buyers and the shortage in the number of properties being listed.

New research shows that renting a home has become cheaper than buying in most parts of the country for the first time in 6 years.

According to Hamptons, research suggests that before the pandemic in March 2020, people buying with a 10% deposit would have been better off than renters by £102 a month.

However, last month, the average private-sector tenant was better off, spending £71 a month less in rent than if they were making repayments on a 10% deposit mortgage.

This means they would have spent a monthly average of £1,054 on rent compared to £1,125 on mortgage repayments – the first time since December 2014 that renting has been cheaper than buying.

There are now only four areas in the UK where it is cheaper to buy than rent.  These are the North East, North West, Yorkshire and Humber, and Scotland.

London has seen the largest shift since the start of the pandemic.  Falling rents mean a buyer putting down a 10% deposit in the capital will have gone from being £123 a month better off buying a home in March 2020 to spending £251 per month less on rental costs in May 2021, according to the findings.

There are, of course, a host of other financial and practical factors which potential first-time buyers will consider when deciding to rent rather than buy, or vice versa, which are not captured in this research.

How much cheaper is it to rent than buy?

Here are the monthly costs of renting relative to buying with a 10% deposit, according to Hamptons.

  • Greater London – £251 cheaper
  • South East – £54 cheaper
  • South West – £108 cheaper
  • East – £117 cheaper
  • East Midlands – £98 cheaper
  • West Midlands, £35 cheaper
  • Yorkshire and the Humber – £5 more expensive
  • North West – £4 more expensive
  • North East – £72 more expensive
  • Wales – £11 cheaper
  • Scotland – £130 more expensive

Buyers with only a 5 per cent deposit face an ever bigger uphill struggle than those with a 10 per cent deposit. A buyer with a 5 per cent deposit will, on average, spend around £195, or 19 per cent, more each month than if they had carried on renting, Hamptons said.

Amid fairly cheap mortgage deals, the stamp duty holiday and a strong desire among buyers for more space and a lifestyle change, the pandemic has prompted frenzied activity in the property market in many parts of the country.

Around 704,000 homes on Rightmove’s website are currently marked as ‘sold subject to contract’, which means the sale has been agreed, but contracts are yet to be exchanged.

Aneisha Beveridge, head of research at Hamptons, said:

‘’ The pandemic has reversed a six-year trend which now makes it cheaper to rent rather than buy a home.

A year ago, lenders were either increasing their rates or withdrawing higher loan-to-value mortgages altogether. For first-time buyers in particular this pushed up the cost of paying a mortgage if they could get one at all, to well above the cost of renting.

It is likely the balance will swing back somewhat towards buying, particularly as mortgage rates come down. However, this is likely to be partly offset by rising house prices.

And while interest rates are falling, they’re still considerably above where they were pre-pandemic on higher LTV (loan-to-value) loans. Despite this, we expect the gap between renting and buying to close over the remainder of this year, moving back towards longer-term levels in 2022.”

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Lewis Finn

Experienced Sales Manager with a demonstrated history of working in the financial services industry. Specialising in offshore investments & UK investment property.

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