Buying home 'cheaper than renting' in eight out of 10 British towns

Published 02nd Mar 2011

Buying a house is cheaper than renting it in eight out of 10 towns as house prices are falling and rents are rising, a new research has shown.

Renting a home now costs an average of 10.5 per cent more than paying interest on a mortgage for a comparable property, up from a premium of 8.7 per cent in the middle of last year, according to property website Zoopla.co.uk.

The group said as a result of low interest rates and falling house prices, people were better off buying a two-bedroom flat than renting one in 80 per cent of towns and cities in Great Britain.

The difference was greatest in Milton Keynes, where it cost 42 per cent more to rent a home rather than buy one, with rents on a two-bedroom flat averaging £785 a month, while an interest-only mortgage on a similar property would be £554.

It was 38 per cent cheaper to buy a typically first-time buyer home than to rent one in Walsall, while typical rents were 35 per cent higher than mortgage payments on a two-bedroom home in Birmingham, based on an interest rate of 5 per cent.

Reading and Derby completed the top five places where it was cheaper to buy than to rent, with people paying premiums of 34 per cent and 27 per cent respectively to be a tenant.

Overall, rents exceeded the cost of having a mortgage by more than 20 per cent in 14 of the largest towns and cities in Great Britain.

The group said the current problems in the mortgage market had left many people unable to buy their own home, boosting demand for rented accommodation. But the credit crunch had also hit landlords, with many investors also unable to borrow to expand their portfolios, creating a mismatch between supply and demand and driving up rents.

There were still several locations where it was cheaper to rent than to buy. Plymouth had the best value rental market, with tenants paying an average of £581 a month, compared with interest-only mortgage payments on a similar property of £652.

People would also be more than 10 per cent a month better off if they rented, rather than bought, in Huddersfield and Swansea. Renting was 7.4 per cent cheaper than buying in Aberdeen, while tenants could save 5.9 per cent in Oldham and 5.1 per cent in Edinburgh, compared with homeowners.

Nicholas Leeming, business development director of Zoopla.co.uk, said: ‘While buying wins out over renting today, the impact of a possible rise in interest rates cannot be ignored.

‘If interest rates were to increase by 1 per cent and rents were to remain the same, renting would become more cost-effective in 78 per cent of the locations studied.’

Source: ' ThisIsMoney '

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