Homeowners pay substantially more on their mortgage each month than tenants in equivalent properties pay on rent – yet within five years of buying they will be financially better off.
According to property website Zoopla, homeowners with mortgages pay an average £316 more per month compared to those renting equivalent properties. The average monthly rental across the UK is £865 per month versus an average monthly mortgage repayment of £1,181.
However Zoopla’s anaylsis shows that while renters may pay less each month, owners recoup their initial costs and become better off than renters within five years on average as a result of the value of equity in their house outstripping savings. And after seven years, the average owner is £13,850 better off compared to an equivalent tenant.
Aberdeen, Dundee and Glasgow are currently the most cost-effective towns for buying versus renting, as the average monthly mortgage repayment is less than the average rent. At the other end of the scale, Bournemouth, London and Huddersfield are the most cost-effective places for renters due to higher property prices relative to rents for equivalent properties. London owners pay nearly £1,790 more a month than the average renter in the capital.
Lawrence Hall of Zoopla says people who invest in property are “playing the long game”.
“While buyers have to swallow the initial upfront costs of purchasing a property, they ultimately reap the benefits over renters down the line from building up equity in an asset that they will own by the end of the mortgage term.
“With the strong house price growth we’ve experienced this year and interest rates still low, saving for even a 10 per cent deposit takes its time.”
