Mortgage repayments cheaper than renting - Mortgages - News - Moneyfacts


Mortgage repayments cheaper than renting

Mortgage repayments cheaper than renting

Category: Mortgages

Updated: 30/01/2012
First Published: 30/01/2012

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

The cost of mortgage repayments on a typical home is more than £100 cheaper than renting in England and Wales .

The average monthly cost of buying a three bedroom house was £600 in December 2011; £116 (or 16%) lower than the average monthly rent of £716 paid on the same property, figures from Halifax show.

It marks a notable turnaround from just three years ago when the average cost of buying a property was almost a third (29%) higher than the average price of renting.

At the time, the average monthly cost of owning a property was £928, with monthly rents averaging £721.

It means that Britons currently spend far less of their disposable income on mortgage repayments, with the percentage falling from 47% in 2008 to 29% in 2011.

In fact, buying a home was most cost effective in every region apart from Wales in December 2011. By contrast, buying was more costly than renting in all regions in December 2008, demonstrating the considerable turnaround over the last three years.

Other factors have contributed to making paying back a mortgage loan more affordable compared to renting.

Average mortgage rates for new borrowers have fallen considerably in the last three years, while the cost of renting has gone up since 2009.

But despite the affordability, obstacles still remain in the way of potential buyers.

"Despite the improvement in the relative affordability of buying a home, the number of purchasers has continued to fall due to the ongoing challenges in raising a deposit and the considerable uncertainty over the prospects for the UK economy, which have severely constrained housing demand," said Martin Ellis, housing economist at Halifax.

It means that the number of people entering the market has continued to decline despite the improvement in the affordability of buying compared with renting since 2008.

It is estimated that there were around 510,000 home purchases with a mortgage in 2011 – the lowest annual total since 1974 and 6% lower than in 2010.

Find the best mortgage rate - Compare best selling mortgages

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.

Related Articles

Does your mortgage lender owe you money?

Earlier this week, the financial watchdog revealed that hundreds of thousands of mortgage holders could have been overcharged by their lender. Are you one of the many who could be in line for a windfall?

Do you think your home will rise in value?

There’s been a lot of talk recently about the rate of house price growth slowing, but is it affecting your personal expectations? According to research, it could be, with fewer people now expecting the value of their property to increase.

Confidence among “second steppers” is on the rise

We all know how difficult it can be taking that first step on the ladder, but what about the second step? In many cases, getting onto the next rung can be just as challenging, but happily, confidence among this cohort appears to be on the rise.