In most of the biggest towns and cities in the United Kingdom, it costs more to rent a two-bedroom home than to buy one. The survey took data from the top fifty towns and cities and assumed that buyers would be paying back a 5% interest only mortgage.
On average, the researchers found that the average cost of renting was almost 10% higher then the average cost of buying a home. Milton Keynes came top of the list of places where renting was the less attractive option. The Buckinghamshire town sees average rents exceeding the cost of a mortgage by a massive 43% despite it being close to the capital. Renters there are about £3,000 a year worse off than an owner-occupier. At the opposite end of the scale it is considerably more cost effective to rent in Poole, Dorset than actually buy a property. Renters in the affluent seaside town are paying 27% less than buyers of a similar property. A tenant can save £3,300 per year by renting a property instead of buying it.
Nicholas Leeming, part of the research team, said “The relative cost of renting as opposed to buying has increased over the past year as rents have risen while house prices and interest rates have remained flat. Almost 750,000 would-be first-time buyers have reluctantly ended up as renters over the past three years because they can’t get a mortgage. With current house prices and interest rates, and with rents on the rise, the fact is that for those who can get a mortgage, there may never have been a better time to buy.”
London has by far the highest property prices in the UK and the research revealed that buying was still 16% more cost effective than renting. The average tenant who lives in a property protected with landlord insurance will be paying £2,137 each month considerably more than the £1.850 a buyer will have to pay in mortgage payments.