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Due to low mortgage interest rates, buying a home is becoming more affordable than renting.
The monthly cost of buying a three-bed home is £608, £98 lower than renting the same property, according to a study by The Halifax.
The figures represent a turnaround considering only three years ago the costs of buying were 43% higherthan renting.
In the same time, average mortgage rates have slipped to an average 3.59% from 5.82%, helping to bring the average monthly mortgage payment down by 39%.
Three years ago, buying costs ate a larger slice of disposable income than rent – 56% to buy against 39% to rent. Now, the costs have slimmed down to 27% to buy compared with 31% to rent.
Nevertheless, buyers who switch to renting could generate a cash windfall of an average £55,000 by releasing the equity tied up in their homes. Stashing the cash in a high interest investment bond could lead to a £114 per month cash return.
Suren Thiru, housing economist at The Halifax, said: “The typical monthly mortgage payment has declined by more than a third since 2008 due to falling mortgage rates and lower house prices. The fall in the cost of buying compared to the average rent paid by tenants has been significant. Such a marked decline in mortgage costs has improved affordability for those able to enter the market as well as helping to ease the pressure on existing homeowners’ disposable income.
“Although the current trade-off between buying and renting is expected to narrow when interest rates start to rise again, the long-term benefits associated with investing in bricks and mortar are likely to ensure that buying will continue to be viewed favourably by many.”
Buying a home is more affordable than renting in 10 of 12 UK regions, with only Wales and Northern Ireland bucking the trend. Buying was more expensive than renting in all regions in March 2008.
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