Buying a property is cheaper than renting
Mortgages are now cheaper to pay than rents in nine out of ten UK towns making owning a house the more affordable option over renting. Tenants are now paying the highest rents ever recorded with prices rising 2.1% in the last month according to the Rental Index who compiled data from HomeLet. The average rent for a home is currently at £806 a month, the first time average rents have ever risen over £800 a month.
In another report by Homelet, it showed that mortgage repayments on an interest only mortgage is lower than the average price of renting a property of the same type in 44 out of 50 of the largest towns and cities across the country. This is not good news for the majority of young adults and probably why the average age of the first time buyer has increased to 37 years old. With rising rents, saving for a mortgage deposit is becoming increasingly difficult for many first time buyers which could leave them trapped in the rental market forever.
As expected, the most expensive rents are found in London which reached a new average high of £1,272 a month leaping up 2.3% since July. In contrast, rents have dropped the most in the South West with a 3.5% annual fall making the average rent £753 per month and in the North East, they have experienced a third consecutive drop in rents of 3.3% to £524 per month.
The property website Zoopla found that paying a mortgage on a two bedroom flat costs less than renting the equivalent property in 88% of the towns in Britain. York tops the mortgage cheaper than renting list as you can buy a two bedroom flat for an average price of £156,098 with monthly mortgage repayments of £650 however, if you were to rent this property it would cost you an average of £1,096 a month!
The three places in the UK where renting is cheaper then paying a mortgage is Oldham, Bournemouth and Swansea. The average price for a two bedroom flat in Bournemouth is £215,712 with monthly mortgage repayments of £899 however, you can rent a similar property for an average monthly rent of £776.
In London, the average rent costs 17% more than paying a mortgage making it the most expensive place to rent rather than buy a home compared to the rest of Britain. If you were to rent a two bedroom flat in London it would cost an average of £2,362 per month where mortgage repayments will cost an average of £2,013 making the buyer £4,200 per year better off than the renter.
The reason why rents are continually rising to record highs is because of the demand for rental property. The demand is growing partially because of the difficulty in securing a mortgage due to stricter criteria and the requirement for higher deposits. Therefore, more people are forced into renting and so the market becomes ideal for buy to let investors.
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