Renting a property in Britain is now cheaper than buying a home for the first time in more than six years, according to estate agency Hamptons. The shift comes despite a 7.1% rise in average rents over the past 12 months, as strong house price growth and higher mortgage rates on high loan-to-value loans have pushed up the cost of home ownership.
Hamptons' research shows that a typical first-time buyer now spends £1,054 per month on rent compared to £1,125 on mortgage repayments, a saving of £71. This reverses a long-standing trend: before the pandemic in March 2020, buyers with a 10% deposit were better off by £102 a month.
The change means that only four areas in the UK remain cheaper to buy than rent: the North East, North West, Yorkshire and Humber, and Scotland. In London, the gap has widened dramatically; a buyer putting down a 10% deposit in the capital would have been £123 better off buying in March 2020, but now spends £251 less on rent per month.
Aneisha Beveridge, Hamptons' head of research, attributed the reversal to the pandemic. "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."
Ms Beveridge expects the gap to narrow as mortgage rates fall, but said rising house prices may partly offset 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."
