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Homebuyers pay less than renters in a third of UK towns and cities Homebuyers pay less than renters in a third of UK towns and cities
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Buying a home is cheaper than renting the same property in a third of Britain’s towns and cities – all of them outside the south of England – according to new figures.Buying a home is cheaper than renting the same property in a third of Britain’s towns and cities – all of them outside the south of England – according to new figures.
Property website Zoopla said servicing a 90% mortgage on a typical two-bedroom home costs an average £724 a month across Britain, while renting comes in at £666. Around the country, however, there are big differences in the relative cost of being a homeowner and a tenant – paying off a mortgage works out cheaper in 36% of cities.Property website Zoopla said servicing a 90% mortgage on a typical two-bedroom home costs an average £724 a month across Britain, while renting comes in at £666. Around the country, however, there are big differences in the relative cost of being a homeowner and a tenant – paying off a mortgage works out cheaper in 36% of cities.
In Glasgow, Zoopla said, buyers who had raised a 10% deposit would repay an average of £447 a month to their lender, far below average rents of £596. Buyers in Dundee stood to pay £112 less each month, while in Birmingham the premium paid by tenants was £97.In Glasgow, Zoopla said, buyers who had raised a 10% deposit would repay an average of £447 a month to their lender, far below average rents of £596. Buyers in Dundee stood to pay £112 less each month, while in Birmingham the premium paid by tenants was £97.
In contrast, the website found that in many parts of the south-east homebuyers would pay much more than tenants for the same sized property. In London, the average asking price for a two-bedroom home on the site was £665,000, which resulted in a monthly mortgage payment of £3,302 – 50% higher than the average monthly rent of £2,218; in Reading, Cambridge and Brighton the premium for buyers were all at least 25%.In contrast, the website found that in many parts of the south-east homebuyers would pay much more than tenants for the same sized property. In London, the average asking price for a two-bedroom home on the site was £665,000, which resulted in a monthly mortgage payment of £3,302 – 50% higher than the average monthly rent of £2,218; in Reading, Cambridge and Brighton the premium for buyers were all at least 25%.
The figures are based on 90% mortgages taken out at an average rate of 4.5%. A price war among lending banks and building societies means some borrowers are able to access deals as low as 2.38% with a 10% deposit, however most of the cheapest deals are reserved for those with more equity to put down.The figures are based on 90% mortgages taken out at an average rate of 4.5%. A price war among lending banks and building societies means some borrowers are able to access deals as low as 2.38% with a 10% deposit, however most of the cheapest deals are reserved for those with more equity to put down.
Zoopla’s figures highlight why buyers in the south-east have been frequently turning to family members for help with a deposit, as strict affordability checks mean payments of £3,302 a month would be out of the question for all but the highest earners.Zoopla’s figures highlight why buyers in the south-east have been frequently turning to family members for help with a deposit, as strict affordability checks mean payments of £3,302 a month would be out of the question for all but the highest earners.
Related: Landlords profit most from east of England properties, survey shows
On a 75% mortgage, monthly repayments would be around £600 lower in Zoopla’s example, using the same interest rate.On a 75% mortgage, monthly repayments would be around £600 lower in Zoopla’s example, using the same interest rate.
Neal Hudson, a housing market analyst at property firm Savills, said buyers able to achieve a 75% mortgage would find repayments cheaper than renting in most parts of the country. “A 90% to 95% loan-to-value mortgage typically comes with a higher mortgage rate and so rents may be lower than mortgage repayments in some markets,” he said.Neal Hudson, a housing market analyst at property firm Savills, said buyers able to achieve a 75% mortgage would find repayments cheaper than renting in most parts of the country. “A 90% to 95% loan-to-value mortgage typically comes with a higher mortgage rate and so rents may be lower than mortgage repayments in some markets,” he said.
“The problem in London is that house prices are so high relative to incomes that a high enough LTV mortgage will be unaffordable to repay for all but the highest-income buyers.“The problem in London is that house prices are so high relative to incomes that a high enough LTV mortgage will be unaffordable to repay for all but the highest-income buyers.
“Most first-time buyers in London have very large deposits – typically 127% of their income.”“Most first-time buyers in London have very large deposits – typically 127% of their income.”
The figures are unlikely to provide much comfort to tenants who are locked out of the property market. Although renting is cheaper in some cities, the cost has been rising and those trying at the same time to raise a deposit to buy are finding the task increasingly difficult.The figures are unlikely to provide much comfort to tenants who are locked out of the property market. Although renting is cheaper in some cities, the cost has been rising and those trying at the same time to raise a deposit to buy are finding the task increasingly difficult.
In Glasgow, buyers would need to raise a deposit of £9,000, before the other costs of buying, according to Zoopla’s figures, while paying almost £600 a month in rent, while in Edinburgh they would need to save almost £16,000 while paying £852 a month to a landlord.In Glasgow, buyers would need to raise a deposit of £9,000, before the other costs of buying, according to Zoopla’s figures, while paying almost £600 a month in rent, while in Edinburgh they would need to save almost £16,000 while paying £852 a month to a landlord.
Dan Wilson Craw, policy manager at Generation Rent, said: “In areas where renting works out cheaper month-to-month than paying a mortgage, housing costs still take up a large chunk of the average household’s income – and that money isn’t paying off an asset that they’ll own.Dan Wilson Craw, policy manager at Generation Rent, said: “In areas where renting works out cheaper month-to-month than paying a mortgage, housing costs still take up a large chunk of the average household’s income – and that money isn’t paying off an asset that they’ll own.
“Private renters also face insecure tenancies with the constant threat of having to move within the next year, and no incentive to invest in their home, so it’s not surprising that so many are desperate to buy.”“Private renters also face insecure tenancies with the constant threat of having to move within the next year, and no incentive to invest in their home, so it’s not surprising that so many are desperate to buy.”