Lawrence Hall, Zoopla.co.uk: Tenants pay 14% more per year than owners
As we've said before in this property column, the decision to buy or rent comes down to individual personal financial circumstances.
In the current climate buyers are struggling to secure mortgages. This is regardless of whether they are first-time buyers or not.
The latest renting versus buying research from Zoopla.co.uk shows that for a two-bedroom flat, renting is almost £1,000 a year more expensive and that it is now cheaper to service a mortgage than rent in 86 per cent of UK cities. In other words, tenants pay 14 per cent more on average in rent than owners pay in servicing mortgages.
Zoopla's analysis of the cost of renting compared to servicing a mortgage reveals that renting a typical two-bedroom property is £987 more expensive per year than paying an interest-only mortgage on an equivalent home.
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The current average asking rent for two-bedroom flats nationally is £669 per month, compared to an average asking price of £140,692. Servicing an interest-only mortgage at five per cent would cost £7,035 a year, 14 per cent less than the £8,028 paid by the average tenant for such a property. Using a 90 per cent LTV interest-only mortgage at a typical Best Buy rate of 4.39 per cent the premium paid by tenants is even higher. The average mortgage would stand at £126,623 with an interest cost of £463 per month, saving the average owner £2,463 a year (not including the cost of the 10 per cent deposit).
This is partly due to the difficulties faced by first-time buyers in getting a mortgage which in turn is pushing up the cost of renting. Buying is now cheaper than renting across 86 per cent of the UK's cities, up from 84 per cent one year ago.
Comments
by NibNobs
Wednesday, March 13 2013, 8:49AM
“Buy-to-let investors can also be confident of jacking up the rents they charge because they know the demand is there in Gloucester from couples in local jobs on low paid wages of typically £6.50-£8.00 per hour with no hope of ever saving £15,000+ for a deposit for a house!
There are so many single people and young couples currently in rented accommodation who have missed out on the housing boom of the 80's & 90's where it was possible to make more money from the increase in property prices per year than some people can earn in that year.
It's turning out to be a lost generation in property ownership if you are in your twenties (unless you are on a big salary with a really good career path)”