Cheaper to buy a house than rent in UK
Falling house prices and rising rents have made it cheaper to buy a home than be a tenant in eight out of 10 towns, research has indicated.
Renting a home now costs an average of 10.5% more than paying interest on a mortgage for a comparable property, up from a premium of 8.7% 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% of towns and cities in Great Britain.
The difference was greatest in Milton Keynes, where it cost 42% 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.
It was 38% cheaper to buy a typically first-time buyer home than to rent one in Walsall, while typical rents were 35% higher than mortgage payments on a two-bedroom home in Birmingham, based on an interest rate of 5%.
Reading and Derby completed the top five places where it was cheaper to buy than to rent, with people paying premiums of 34% and 27% respectively to be a tenant.
Overall, rents exceeded the cost of having a mortgage by more than 20% in 14 of the largest towns and cities in Great Britain.
The group said the current 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.
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.
People would also be more than 10% a month better off if they rented, rather than bought, in Huddersfield and Swansea.
Renting was 7.4% cheaper than buying in Aberdeen, while tenants could save 5.9% in Oldham and 5.1% in Edinburgh, compared with homeowners.
Nicholas Leeming, business development director of Zoopla.co.uk, said: "While buying wins out over renting today, the impact of a possible rise in interest rates cannot be ignored.
"If interest rates were to increase by 1% and rents were to remain the same, renting would become more cost-effective in 78% of the locations studied."