London’s rents are cheaper than mortgages

London’s rents are cheaper than mortgages

0:04 AM, 13th May 2024, About a month ago 2

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The financial challenges being faced by aspiring homeowners in the capital have been revealed by a study which shows a significant gap between mortgage payments and average rents.

The research by SBA Property Management shows that the difference makes buying a property in London a less attractive option compared to other UK cities.

Across London, homeowners typically pay £797 more per month on mortgages compared to what tenants pay in rent.

This translates to a 42% difference, a much higher disparity than in cities like Manchester (16%), Bristol (18%), Leeds (21%), Liverpool (29%) and Birmingham (31%).

Property market has always been challenging

Tim Darwall-Smith, a director at the firm, said: “London’s property market has always been challenging for prospective buyers, however, in recent years rising house prices and borrowing costs have pushed homeownership even further out of reach for many people.

“A London deposit, along with other costs like stamp duty and legal fees, can take years of saving for – but as the research shows, the cost of buying in the capital is still significantly higher than other parts of the country even after putting down a deposit.”

He added: “Rising homeownership costs are steering would-be buyers toward the rental market, as well as other cities where property prices and mortgage costs are more affordable.”

The most expensive boroughs

The firm’s research also explores the geographical variations within London’s housing market to find the most expensive boroughs.

It says that Kensington and Chelsea have a £2,927 difference between mortgage payments and rents in that area.

Even in more affordable areas, the extra costs associated with mortgages remain significantly higher compared to other parts of the country.

This financial burden is pushing many potential buyers towards renting for longer or seeking more affordable property markets outside London.

Data from the English Housing Survey also confirms this trend, with a 4% fall in owner-occupied homes with mortgages in London over the past three years – and a corresponding rise in private rentals.

Renting is the only viable option for many

The high cost of living in London also exacerbates the situation, making renting the only viable option for many Londoners.

That is until they can save enough for a deposit and cope with the ongoing mortgage costs.

The firm’s research also identifies pockets of hope for potential buyers.

It reveals that boroughs like Barking and Dagenham offer mortgage costs lower than the national average for England.

Here, renters need to find an extra £364 per month to cover mortgage payments compared to rent.

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Cider Drinker

8:49 AM, 13th May 2024, About a month ago

I guess homebuyers only pay more for their mortgage when compared to a similar rental for (typically) 25 years. Once the mortgage is paid off, they will live mortgage and rent free.

Rent could reasonably be more than the interest only element of a mortgage. There is a number of things that renters should consider in addition to the mortgage interest. Things such as a return on the initial deposit that their landlord should expect, the additional SDLT that a landlord pays, the selective licensing, insurances, letting fees, maintenance, void periods, legal fees to deal with bad tenants and, of course, the risk of house prices falling. It’s also much easier for tenants to move home.

You simply cannot compare rent to mortgage payments. They buy different things.


11:00 AM, 13th May 2024, About a month ago

This is an interesting report. Most homeowners will tell you it's far more costly to own than rent, plus you have the responsibility to maintain and insure your home, which renters don't have. Of course, if you have purchased a leasehold property which, in London and other big cities, is likely to be a leasehold apartment, your costs will be devastatingly high and unaffordable for many.

This feels like it's pointing to BTR being the way forward.

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