Renting costs more than buying in most of Britain

Renting is now more expensive than buying in eight out of ten UK towns and cities.

The figure is up from 74% in July as asking prices have come down and rents have increased.

On average, rents are now 9.9% than mortgage payments.

Research by Zoopla compares current asking prices to average rents for two-bedroom flats in the 50 largest cities and towns around the country. Mortgage payments were calculated assuming an interest-only mortgage at 5% p.a.

In some locations, the extra cost of renting is staggering. In York, rents exceed mortgage payments by 39%: with average monthly rents at £978, York tenants are £3,270 a year worse off than if they were buying.
 
In a further 13 of the largest 50 cities and towns, rents exceed mortgage payments by more than 20%.

Even in London, which has the highest asking prices in the country, buying is still the more cost-effective option. The average rent of £2,121 per month is still high compared to the average asking price of £444,553, but buyers are better off than tenants by 14%.

However, there are still some locations where renting is a better option than buying. In Aberdeen, where the average two-bed flat costs £833 per month to rent versus £254,618 to buy, renting is 21% cheaper than the average mortgage payment.
 
Nicholas Leeming, Zoopla’s commercial director, said: “We’re seeing a real divide in the housing market. For those who are able to buy a home, costs are low, but for those who can’t, costs are much higher – and the doorway into the housing market is narrower than ever.

“The freezing up of credit has put home ownership beyond the reach of many renters, and it’s driving a larger and larger wedge between them and owner-occupiers.”

However, that situation would change sharply if interest rates were to increase by just 1%. Then, renting would become more cost effective in 72% of the locations studied.