17:11 PM, 3rd March 2011, About 10 years ago 1
The cost of renting a home is more expensive than buying in 8 out of 10 towns and cities, according to online property portal Zoopla.
The mounting cost of renting is disclosed in research showing tenants pay a 10.5% premium on average, when compared to the mortgage costs of a homeowner paying for a 5% interest-only loan.
The cost is steadily rising as the last survey in August 2010 put the gap at 8.7%.
The Zoopla research does reveal that if interest rates rise by 1%, then the figures reverse and letting becomes cheaper than buying a home in 78% of Britain’s towns and cities. The survey pulled together figures for renting a two bedroom flat in the UK’s 50 largest towns and cities.
Top of the price differential league was Milton Keynes, where rents are an average 42% higher than mortgages, meaning renters pay £2,772 more a year than a buyer for letting the same property.
The other top three places were taken by Walsall, where rents are 38% higher than mortgages, and Birmingham, where they are 35% more expensive. Nine other towns and cities had rents costing an average 20% more than comparative mortgages for the same property.
Plymouth was highlighted as one city where renting was cheaper than buying. A glut of buy to let properties on the market was blamed for pushing rents down and making properties £71 a month cheaper to let than buy.
Although housing costs more in London, it is still more cost effective to buy in the capital. Average rents in the city are £2,252 per month with buyers saving on average £388 per month, £4,656 annually, by paying out for a mortgage.
However, Plymouth was one location that proved cheaper to rent than buy, with average rents coming in at £71 cheaper than buying. Zoopla.co.uk said this was down to the large supply of buy-to-let properties in the area putting downward pressure on rents.
Nicholas Leeming, business development director of Zoopla.co.uk, said: “While lenders maintain their vice-like grip on the mortgage market, more and more would-be buyers are forced to rent instead of getting onto the housing ladder.
“Rents will likely rise further as a result and renters will continue to pay a significant premium for being stuck in the sector.”
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