A typical first-time buyer will now find it cheaper to rent than buy, according to Hamptons.

The estate agent said that the pandemic has reversed the five-year trend of buying a home being cheaper than renting one. It said that in March 2020, on the eve of the pandemic, a purchaser with a 10% deposit would have been £102 per month better off buying than renting.

But that has flipped and in May 2021 it was £71 per month (or 7%) cheaper for a typical first-time buyer with a 10% deposit to rent a home than it was to buy. They would have spent a monthly average of £1,054 on rent compared to £1,125 on mortgage repayments.

Regional trends

Hamptons also found that in early 2020 it was cheaper to buy than rent in every region of the country. But in May 2021 it was cheaper to rent than buy in seven regions.

The only places where it was cheaper to buy this May were the North East, North West, Yorkshire & Humber and Scotland.

In London there has been a significant shift over the course of the pandemic. A buyer putting down a 10% deposit on a property in the capital will have gone from being £123 per month better off buying in March 2020, to spending £251 per month less on rent in May 2021.

Falling rents in the capital have made renting cheaper relative to buying by a bigger margin than anywhere else. And with rents still falling, the differential looks set to continue growing.

Cost of renting

Last month the average cost of a newly let rental home in Great Britain rose to £1,054 a month, up 7.1% on the same time last year.

Rents in the South East and South West hit double digits for the second consecutive month, rising 13.0% and 11.5% respectively. London continued to be the only region where rents fell (-0.5% year-on-year).

Hamptons noted that with the cost of renting relative to buying ‘at the lowest level since at least late 2013, it is likely the balance will swing back somewhat towards buying, particularly as mortgage rates come down’.

Holly Andrews, managing director at KIS Finance, added: “Many finance experts recommend that people get themselves onto the property ladder as soon as possible, however, in the current market, renters may be better to hold off and wait until house prices and interest rates settle back down.

“Although interest rates are falling, they are still higher than they were pre-pandemic, especially for higher LTV mortgages. So for those who have smaller deposits (10% or less), it’s likely that they will now be better off to stay in rented accommodation and try to save a bigger deposit (15% – 20%) rather than rushing to get onto the property ladder.”