The results from the annual UK Rent Versus Buy Index from Abbey Mortgages shows that the average monthly cost of a mortgage for 25 years and the average monthly cost of rent for the same period are converging.
Last year, the saving made from buying over renting was over £24,000, whereas this year its £5,811. Thats a massive fall of 76 per cent.
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The research, which surveyed the average cost to a buyer who has a mortgage for 25 years compared to the average cost for a person renting across the UK, found that the average cost of renting is £443,736 while to buy a home over the same period is £437,925 a saving of £5,811 or 1.3 per cent. Last year the results showed that homeowners were better off than renters by an average of 6 per cent.
But thats not the case in every area. Regions across the UK differ and in some it is now better value to rent rather than buy:
- Youre better off renting in Northern Ireland, Wales and the North West
- In Yorkshire, London and the Midlands you would pretty much break even
- East Scotland and the North are places where its better to buy rather than rent
Wheres best to buy?
West Scotland, which last year held the top spot in terms of the place that was better to buy rather than rent, was pushed down in the league table but still is a place where it is better value to buy rather than rent.
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This year East Scotland topped the table with a saving for homeowners of 21 per cent. The North, South East and East Anglia too, all have a compelling saving for homeowners of 10 per cent or more. West Scotland and the South West scrape into this category with 7 and 6 per cent respectively.
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Wheres best to rent?
Northern Ireland is the best place to rent with people who buy being 46 per cent worse off than people who rent. This is mainly due to the 50 per cent increase in house prices in the last year alone. Wales and the North West are two other regions where you are paying more each month to buy your home than rent it.
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However, while the cost of renting and buying is converging, this does not account for the fact that with a repayment mortgage, you end up owning the property when the 25 years are up. In addition, homeowners benefit from any capital appreciation which might be earned during that period.
Nici Audhlam-Gardiner, Head of Mortgages at Abbey said: A number of factors have come together to cause rent over 25 years and a mortgage for the same period to converge across the UK. But while on a month-to-month basis in some areas it is cheaper to rent rather than buy, at the end of the 25 years a homeowner actually has a house whereas a renter has nothing. In addition, homeowners benefit from any further house prices rises as the value of their equity increases over time.
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So despite the convergence, we believe that people are still better off owning a property. The people who really struggle however are first-time buyers who find it difficult to get on the property ladder. We think it is the role of mortgage lenders to come up with new initiatives so that more people can achieve their dreams of owning a home.
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