Buying UK property is once again cheaper than renting it, according to new figures from Zoopla. A growing number people are trapped between the privated rented sector and the property ladder, unable to afford to purchase a home and stuck renting instead.
The Help to Buy mortgage schemes helped to make lending more accessible for those keen to climb onto the ladder, but also contributed indirectly to rising prices, as demand exceeded supply and pushed up values. This left those in rented accommodation better off financially than those seeking to own.
The balance between the two budgets remains a difficult act, often depending on how long-term or short-term your buying/renting plans are. Now, though, Zoopla confirms that is cheaper to buy a home than rent it – as long as you own that home for at least five years.
Homeowners with mortgages pay £316 more on average per month compared to those renting equivalent properties, according to the property portal’s research. Indeed, the average monthly rental across the UK currently stands at £865 per month versus an average monthly mortgage repayment of £1,181.
While renters may pay less each month, though, owners recoup their initial costs and become better off than renters within five years on average, as a result of the value of equity outstripping the value of savings. And after seven years, the average owner is £13,850 better off compared to an equivalent tenant.
Aberdeen, Dundee and Glasgow are currently the most cost-effective towns for buying versus renting, as the average monthly mortgage repayment is less than the average rent. At the other end of the scale, Bournemouth, London and Huddersfield are the most cost-effective places for renters due to higher property prices relative to rents for equivalent properties. London owners pay nearly £1,790 more a month than the average renter in the capital.
Lawrence Hall of Zoopla says: “People who invest in property are playing the long game. While buyers have to swallow the initial upfront costs of purchasing a property, they ultimately reap the benefits over renters down the line from building up equity in an asset that they will own by the end of the mortgage term. With the strong house price growth we’ve experienced this year and interest rates still low, saving for even a 10 per cent deposit takes its time.”
Source: The Movechannel