A report by property portal Zoopla has revealed that paying a mortgage on a property is cheaper than renting an equivalent home in 86% of towns and cities across the UK, compared to 90% of conurbations 12 months ago, and the cost benefit is reducing as property prices go up.

It now costs, on average, £961 a year more to rent a property than to pay the mortgage on an equivalent property, compared to a £993 differential a year ago.

The cost of paying an interest-only mortgage on a two-bed flat has increased by 1.7%, equivalent to £120, on average, over the last year. By contrast, the cost of renting has grown by an average of 1.1%, or £84 a year.

A North/South divide remains evident. Lower property values and subdued house price growth in the North mean that Northern towns top the table of places where remains more cost effective to buy property than to rent it. York ranks first in this list, with tenants paying 42% (£3,326) a year more than mortgage borrowers.

In the South, higher and faster-growing property prices mean in some areas it is cheaper to rent a property than it is to pay the required mortgage. Plymouth ranks first, with tenants paying 15% (£845) less a year on average than mortgage borrowers.

In London, where rents are high but property prices are even higher, it costs 6% less a year to rent than to pay the required mortgage on an equivalent property.

Lawrence Hall of Zoopla.co.uk said:

“Buying remains significantly more cost-effective than renting, but the gap is closing. With increased mortgage availability buyer demand is rising, especially amongst first-time buyers, whilst rental demand is falling so house prices are generally rising faster than average rents, although it is clear that large regional differences still exist.”