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Tenants paying 10% more than homebuyers

Tenants paying 10% more than homebuyers

Category: Mortgages

Updated: 15/06/2011
First Published: 15/06/2011

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 It is now over 6 months old so the content may be out of date.

Renting a home in Britain is currently almost 10% more expensive than buying a property, new data has revealed.

It is also cheaper to buy than rent in 40 out of the 50 largest towns and cities across the country, according to Zoopla.co.uk.

The research involves comparing the current asking prices and rents of two-bedroom flats around the country, and assumes interest-only mortgage payments of 5% per annum in order to provide a comparison to the cost of renting.

Milton Keynes comes out top of the list of places where renting is the least attractive option, with average rents exceeding the cost of servicing a mortgage by 43%.

This means tenants in the town are on average £2,964 per year worse off compared to homeowners.

In London, which has the highest property prices in the country and where the average two bedroom flat is going for £431,366, buying is still 16% more cost-effective than renting.

With average rents in the capital at £2,137 per month and the average cost of a 5% interest-only mortgage at £1,797 per month, tenants pay an extra £4,080 a year compared to owners.

At the other end of the scale, the place where tenants are paying least compared to homebuyers is Poole.

Renting in the Dorset town is 27% cheaper than buying, with the average tenant better off by £3,240 per year.

Nicholas Leeming, business development director at the property website, said the relative cost of renting as opposed to buying has increased over the past 12 months because 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 as a result of being unable to get a mortgage," he added.

"With current house prices and interest rates where they are and with rents on the rise, for those who can get a mortgage, there may never have been a better time to buy."

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