Owning a home is £1,098 cheaper than renting
The property website calculates that the average rent on a two-bed flat is £8,258 per year, £1,098 more than the cost of paying the mortgage interest on an equivalent property, assuming an interest rate of 5%.
The saving of £1,098 equates to 4.2% of the average full time salary in the UK (£26,200). Renting is now the cheaper option in only six of the fifty largest towns and cities across the country.
The gap between the cost of buying and renting is the most stark in Reading, where owners pay 34% less than renters on average. Outside Reading, the North dominates the list of places where it is now cheaper to buy than rent, with York, Peterborough, Aberdeen and Hull making up the rest of the top five.
Swansea claims first place in the list of places where renting remains more cost-effective than owning, with renters paying 11% less on average.
Renting in London is now cheaper than buying as result of increasing house prices in the capital which have climbed 5.9% on average over the past 12 months, with London renters now saving 9.5% per year over buyers.
Renting is also cheaper than buying in Bournemouth, Bedford and Middlesbrough.
Lawrence Hall of Zoopla.co.uk said:
“Despite the improved first-time buyer market over the past year, demand for rental accommodation is still fierce. Thousands of people who want to buy are still being forced into the private rented sector every month, which is pushing rents up. Provided you can get a mortgage, buying is generally the more cost effective option – particularly in the north, where house prices are lower and rising at slower rate than in the south.
“However, if property prices continue to increase quickly the tables may turn and monthly rent payments could become cheaper than the cost of servicing a mortgage. That has already happened in London, where house prices rises have pulled away from the rest of the country and are rising at a faster pace than rental costs, which has now made renting the cheaper option.”