Cost of servicing a mortgage is lower than renting across 88% of the country
Owning a property beats renting in nine out of 10 British towns with York, Milton Keynes and Derby the most cost effective for buyers, new research shows.
These three towns are the most expensive to rent compared with buying but renting makes more financial sense in Bournemouth, Swansea and Oldham, the research from property website Zoopla shows.
Overall the cost of servicing a mortgage is lower than renting across 88% of the country, or 44 of the 50 largest towns and cities across Britain.
Average rents for all two bedroom flats available outside London currently stand at £659 per month while the average asking price for all two bedroom flats currently for sale outside London is £139,451. Owning one of these properties and servicing an interest only mortgage at a conservative 5% per annum would cost £581 per month, making renting 13% more expensive and leaving buyers nearly £1,000 per year better off, the study says.
However in London renting is even more expensive than buying compared to the rest of the country, with average rents running 17% higher on average than servicing a mortgage.
With current asking prices for two bedroom flats in the capital at £483,069 and the average rent on an equivalent property at £2,362 per month, owners in London are £4,200 per year better off than renters.
‘Whilst buying is clearly the better option than renting at the moment based on our research, the difficulty in saving for a deposit and the tight lending conditions are preventing huge swathes of would be buyers from taking advantage of the current lower cost of owning a home,’ said Lawrence Hall of Zoopla.
‘And with more potential buyers being forced into the rental market, rents are rising based on the higher demand,’ he added.
Meanwhile, the Association of Independent Inventory Clerks (AIIC) is warning that a growing number of landlords are illegally converting garages and outbuildings and offering for rent.
Government research has found that the worst affected areas are the London boroughs of Brent, Ealing, Hillingdon, Hounslow, Newham, and Southwark, along with Peterborough, Redbridge and Slough.
‘Renting out sheds or outbuildings not only falls foul of planning regulation, but also the accommodation is often cramped and unsuitable for someone to live in,’ said Pat Barber, chair of the AIIC.