For the first time in 13 years: Renting Now Cheaper Than First-Time Mortgages

Renting Now Cheaper Than First-Time Mortgages

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Is renting now preferable to purchasing? Perhaps there has been a fresh development in the age-old argument between renting now and buying. This comes as Zoopla releases startling new statistics demonstrating that, on average, renting now in the UK is less expensive than making mortgage payments for first-time homebuyers.

Renting Now
The age-old debate between purchasing and renting now may have undergone a recent change. This comes as Zoopla discloses shocking new data showing that, for first-time homebuyers, renting in the UK is typically less expensive than making mortgage payments. (Photo: Business News)

Mortgage rates are still rising, increasing payments

Despite nationwide rent increases, it turns out that the average UK monthly rent is £122 less than the first-time mortgage payments. Mortgage rates are still rising, increasing payments.

In the midst of the recession, 13 years prior, in 2010, renting now was more affordable than owning. Due to historically low mortgage rates, we have been accustomed to the reality that purchasing is more affordable than renting now.

However, in an article from Ideal Home, there is a silver lining because not all places of the UK may experience this. London and southern England are the most affected, followed by East England and the Midlands. In the meantime, Scotland, Wales, Northern Ireland, and the North of England continue to rank among the most affordable regions in the UK for both purchasing and renting now, with buying still being more affordable than renting now.

We sought the advice of real estate and investing professionals to make sense of the situation, and they clarified what this implies for potential first-time buyers.

READ ALSO: Renting a Home vs. Buying: UK Property Market Analysis

Renting now is less expensive than purchasing a home

According to a survey by Zoopla, the average monthly rent in the UK is £1163, whereas the average monthly mortgage payment on a 15% down payment is computed at £1285. This is where the £122 discrepancy comes from. To match the mortgage repayments with the normal monthly rent costs, buyers in the South of England are required to make larger deposits of 31% on average (amounting to £42,000).

The worst off is, however, London, where the average rent is £2053 and the average monthly mortgage payment is $2546, making renting now £493 less expensive each month.

According to Liz Hunter, director at Money Expert, “despite rents rising in recent months, mortgage rates have risen even quicker and this has reversed the trend making it now cheaper to rent than buy across a number of areas around the UK for the first time in 13 years.”

As reported by inkl, Rightmove reports that the average five-year fixed mortgage rate is currently 5.79%, up from 3.89% a year ago. Even worse, the average two-year fixed mortgage rate is now 6.4%, up from 3.77% from the previous year. The reason for this is because interest rates are rising to combat high inflation.

Should you purchase now or hold off?

Sadly, this indicates that most first-time buyers no longer have any realistic expectations of owning a home. As if it weren’t difficult enough already.

Izabella Lubowiecka, senior property researcher at Zoopla, agrees that it is a challenging housing market for first-time buyers, with high mortgage rates driving up costs for those looking to jump onto the ladder.

She goes on to discuss some tendencies that Zoopla has noticed regarding renting now and owning. ‘It’s important to note that not all first-time buyers consider purchasing a home as a ‘investment’ in strictly financial terms, and we don’t expect their numbers to dramatically decline – at the moment, they make up one in three home purchases. First-time buyers are becoming more resourceful in their approach to moving into a new house, choosing alternate regions to begin their search, looking for more modest properties, or purchasing alongside friends or family.

READ ALSO: Phillip Rumple’s Family Faces Impending Homelessness Due to Rental Scam

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