The gap between the cost of renting and owning a property has narrowed because of rises in house prices. However, renting still works out at 13% more expensive than paying off a mortgage.
According to Zoopla, the main cause of the narrowing gap has been that house prices have climbed at a faster pace over the past year than rents, with the cost of renting a two-bedroom flat across Britain now £84 more expensive on average than last year, whereas the cost of servicing an interest-only mortgage on the same property has risen £120.
The average rental payment on a typical two-bedroom flat is £8,006 per year, compared with £7,045 per year to service a 5% mortgage.
Weaker house price growth in the North has meant that northern towns dominate the list of places where it is cheaper to buy than rent.
In York, for example, it costs £3,326 more to rent than to buy.
In London, however, renting is 6% cheaper than buying.
Lawrence Hall of Zoopla said: “Buying remains significantly more cost-effective than renting, but the gap is closing, although it is clear that large regional differences still exist.”
In practice, it is highly unlikely that first-time buyers will be on interest-only mortgages at 5%. An estimated 1% only of first-time buyers are currently being granted interest-only loans. However, a number of best-buy mortgage deals for first-time buyers quoted by Moneyfacts come in at around or under 5%.
Article courtesy of Landlord Today