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Part of ‘Generation Rent’? You’re better off buying your home

By Pete Mugleston

Published: 11th November 2016 Last updated: 8th August 2019

More than 4.3 million people rent their homes across the UK, and with rental prices continuing to soar it’s no surprise that recent research has revealed hundreds of thousands of tenants may be better of purchasing their own property.

Credit Reference Agency, Experian, recently conducted a study into the benefits of renting over owning a property. They found that monthly mortgage payments a first-time buyer could expect to pay has dropped in 65 per cent of districts during quarter three of this year, thanks to the drop in interest rates by the Bank of England. When comparing this rental prices over the same periods, tenants renting privately paid more for their accommodation in 57 percent of districts.

The figures from Experian based on a typical buyer’s loan arrangement – 90 per cent of the property on a two-year fixed rate mortgage over 25 years. The amount renters’ pay for their home is either above or within 10 per cent of the average monthly payments meaning they could afford mortgage that would be in line with their rental costs in a quarter of areas.

It’s hard for first-time buyers to get on the property ladder and the stringent checks lenders apply to assess affordability of mortgage repayments is another hurdle for would-be buyers to jump through. If more lenders took rental repayments into account would it provide a more accurate picture of a borrowers financial track record? It could help them to make more astute lending decisions.

The research (see tables below) highlighted that Scotland is home to six of the ten districts where rental rates exceed monthly mortgage payments by the greatest margin, and also showed that that Manchester, Salford and Hull in the North of England offer some of the best market conditions for renters to become first-time buyers. The study also found that in 36 per cent of districts the cost of renting had increased in the third quarter year-on-year, while mortgage payments had fallen.

However, the reverse was true in just 4 percent of districts, reinforcing that the balance is shifting towards mortgage repayments becoming more affordable than renting.

UK rent & mortgage payment comparisons for 2016 (third quarter).

Comparison Number of Districts % of Districts
Cheaper to rent than buy 321 84%
Cheaper to buy than rent 51 13%
Rental payments – increased 217 57%
Rental payments – decreased 66 17%
Rental payments – no change 100 26%
Mortgage payments – increased 119 31%
Mortgage payments – decreased 248 65%
Mortgage payments – no change 16 4%
Rent and mortgage – both increased 80 21%
Rent and mortgage – both decreased 50 13%
Rent increased, mortgage decreased 137 36%
Mortgage Increased, rent decreased 16 4%

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Where rent payments exceed mortgage payments (by % difference).

District £s Difference rental v mortgage payments % Difference rental v mortgage payments Median Rental Payment Median Mortgage Payment
Overall -£113 -13% £885 £998
Glasgow City £179 28% £650 £471
North Ayrshire £111 25% £450 £339
Merthyr Tydfil £116 24% £475 £359
North Lanarkshire £112 24% £475 £363
West Dunbartonshire £106 22% £485 £379
Dundee City £101 20% £500 £399
Manchester £156 20% £795 £639
Falkirk £81 17% £475 £394
Salford £116 17% £695 £579
Hull £76 16% £475 £399

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