Renting more expensive than mortgage repayments

In years gone by many people have rented homes rather than buying because the monthly cost of renting has been considerably lower than the cost of paying off a mortgage each month. However, recent figures have shown that this has gone into reverse, and after a very turbulent few years in the property market it has actually become cheaper each month to pay a mortgage than to pay rent.

According to the figures it costs around £709 per month to rent the average three bedroom property whereas the same property would cost £608 per month in mortgage repayments. This makes it around £100 cheaper on average to make mortgage repayments than to pay rent on a home. On the other hand just a couple of years ago it would have cost £1060 for the same property to pay a mortgage each month and just £761 to pay rent each month.

There have been many changes in the property and mortgage markets that have led to this change. This includes the base rate remaining at a record low of just 0.5 percent for over two years, which has kept mortgage repayments lower. The lack of availability of mortgages for first time buyers, driven by restrictions from lenders and demands for higher deposits, has led to soaring demand for rented homes, and this in turn has resulted in rental costs rising.

One industry expert said: “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 home owners’ 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.”

Tags: reverse, record, month, disposable income, GBP, existing home