Renting costs more than buying in two thirds of UK cities
As the number of people stuck in the rent cycle continues to rise, a new survey has found that with the necessary deposit, buying a house is cheaper than renting in 60% of UK cities.
It seems a bit of a no-brainer – why waste money on rent if that same money could help you pay off a house? For those with a sizeable amount of disposable income it’s an easy decision to make, but only because they consider the deposit affordable.
Online property portal Zoopla analysed 50 cities and their associated costs by comparing monthly rental prices with the cost of a 10% mortgage in a similar property. Then, once the data was examined, it was found that purchasing a home was cheaper in 60% of the locations investigated – which is of great interest to all property selling experts. Even more startling is that this figure has increased by 20% since April, when stamp duty was increased by George Osborne.
Cities such as Glasgow exhibit some of the largest margins, where mortgage payments average £450 a month, versus £596 a month for renters – almost £150 more. Of course, while buying a house seems simple enough, large rental payments are preventing potential buyers from building up the necessary funds for a deposit.
This worrying trend has only been exacerbated by the news that the average home across the UK now costs six times the average wage – with prices due to rise £44,000 over the next five years.
Luckily there is at least some good news for those who can afford a deposit, with attractive mortgage rates lowering monthly costs, thanks to the influence of the Brexit vote and consumer confidence. But in the long run, owning a home is looking to become an ever more exclusive club.
“The steady decline in borrowing costs over the same period has helped to lessen the impact on affordability for home buyers,” said Nationwide’s chief economist, Robert Gardner.
“The cost of servicing the typical mortgage as a share of take-home pay is now above its 2007 peak in London and above its long-run average in the outer metropolitan and outer south-east regions.”
This also ultimately raises fears for those who need to sell their homes fast, as potential buyers are failing to secure mortgages due to a lack of funds, leaving vendor’s homes on the market for longer periods of time, conceivably leading to reduced asking prices. However, sellers in this situation can use property buying companies who will buy any home for cash, helping them move forward with their lives.