Breaking Up with Bricks: Why Brits are Swiping Left on Mortgages and Making a Date with Renting

The recent surge in mortgage rates has led to a shift in the housing market, making it cheaper to rent a home than to buy one for the first time since 2010, as reported by property website Zoopla. 

The average monthly rent in the UK now stands at £1,163, while average mortgage repayments for first-time buyers with a 15% deposit amounts to £1,285.

 

David Pett, a solicitor with national conveyancing providers MJP Conveyancing, echoes this trend. 

He acknowledges that London and the South East are the most affected areas with higher mortgage costs compared to rent. However, buying a home is still more cost-effective in regions like northern England and Scotland.

 

The average two-year fixed-rate mortgage currently stands at 6.76%, while a five-year fixed deal is at 6.24%, according to Moneyfacts. These rates have seen a significant increase from being below 3% in early 2021.

 

Richard Donnell, Head of Insights at Zoopla, explained that the last decade had been predominantly cheaper to buy than rent due to ultra-low mortgage rates. However, this trend has now reversed despite the swift rise in rents. "Around the country the picture varies as in areas with lower house prices buying is still cheaper than renting," Mr Donnell added. "In southern England where prices are higher, access to home ownership is most out of reach and rents are high as well."

 

Zoopla's calculations show that on average, renting is £122 cheaper per month than paying a mortgage. This difference is most noticeable in London, where the average monthly rent is £493 less than the average mortgage payment. In contrast, in Scotland, where an average home costs £127,000, the average mortgage payment is £128 cheaper than the average rent.

 

The Bank of England has raised benchmark interest rates to combat inflation, resulting in rising mortgage rates. The Bank has increased rates 14 times since December 2021, with the most recent hike bringing it to 5.25%, the highest level in 15 years.

 

Donnell expects mortgage rates to decrease and continued growth in rents to make buying cheaper than renting again as 2023 progresses. However, he warns that housing unaffordability in southern England will continue to be a "real problem for first-time buyers and renters" 

Despite the current trend of renting being cheaper than buying in some regions, homeownership may still be the preference for many. According to various sources, owning a home offers benefits such as long-term financial security, stability, and the opportunity to contribute to the community. It's seen as a symbol of financial success and allows for the building of equity over time^.

David Pett, states "While the financial dynamics have shifted in favour of renting recently, the appeal of homeownership remains strong for many. Owning a home is not just about the monthly costs but also about the sense of stability, community, and long-term investment. For those who can afford it, the potential to build equity and the pride of ownership are powerful motivators."