Buying home ‘cheaper than renting’ in most towns

Renting a home now costs an average of 10.5 per cent more than paying interest on a mortgage for a comparable property, up from a premium of 8.7 per cent in the middle of last year, according to property website Zoopla.co.uk.

The group said as a result of low interest rates and falling house prices, people were better off buying a two-bedroom flat than renting one in 80 per cent of towns and cities in Great Britain.

The difference was greatest in Milton Keynes, where it cost 42 per cent more to rent a home rather than buy one, with rents on a two-bedroom flat averaging £785 a month, while an interest-only mortgage on a similar property would be £554.

Reading and Derby completed the top five places where it was cheaper to buy than to rent, with people paying premiums of 34 per cent and 27 per cent respectively to be a tenant.

Overall, rents exceeded the cost of having a mortgage by more than 20 per cent in 14 of the largest towns and cities in Great Britain.

The group said the problems in the mortgage market had left many people unable to buy their own home, boosting demand for rented accommodation. But the credit crunch had also hit landlords, with many investors also unable to borrow to expand their portfolios, creating a mismatch between supply and demand and driving up rents.

There were still several locations where it was cheaper to rent than to buy, however. Plymouth had the best value rental market, with tenants paying an average of £581 a month, compared with interest-only mortgage payments on a similar property of £652, while people would also be more than 10 per cent a month better off if they rented, rather than bought, in Huddersfield and Swansea.

Renting was 7.4 per cent cheaper than buying in Aberdeen, while tenants could save 5.9 per cent in Oldham and 5.1 per cent in Edinburgh, compared with home owners.