Renting now cheaper than buying for the first time since 2014

Renting now cheaper than buying for the first time since 2014

15:08 PM, 14th June 2021, About 3 years ago

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Research by Hamptons is indicating that the recent inflationary pressure on house prices caused by a lack of supply relative to demand pushed by the Stamp duty holiday has shifted the cost of renting below the cost of ownership for the first time since 2014.

In most areas of the UK, apart from Scotland and the North East as outliers, Hampton’s figures show in May the average tenant spent £71 per month less in rent than if they were making the repayments on a 90% LTV mortgage on the same property. The average monthly rental was £1,054 compared to £1,125 on a 90% LTV mortgage. This is despite rents having risen on average by 7.1% in the last year.

Although this does not take into account the advantage of the capital repayment element increasing equity owned in the property.

However, as recently as March last year, at 90% LTV it would have been the homeowner that was £102 per month better off.

Broken down by area it is now cheaper to rent in:

Greater London by £251
South East by £54
South West by £108
East by £117
East Midlands by £98
West Midlands by £35
Wales by £11

However, it is still more expensive to rent in:

Yorkshire and the Humber by £5
North West by £4
North East by £72
Scotland by £130

Hamptons’ head of research, Aneisha Beveridge, said: “The pandemic has reversed a six-year trend which now makes it cheaper to rent rather than buy a home. A year ago, lenders were either increasing their rates or withdrawing higher loan-to-value mortgages altogether.

“For first-time buyers in particular this pushed up the cost of paying a mortgage if they could get one at all, to well above the cost of renting and while interest rates are falling, they’re still considerably above where they were pre-pandemic on higher LTV loans.

“Despite this, we expect the gap between renting and buying to close over the remainder of this year, moving back towards longer-term levels in 2022.”

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