It is cheaper to rent a home in the private sector, then buy one

Estate agency Hamptons has revealed it is cheaper to rent a home then purchase your own, for the first time in six years.

Ongoing research shows that, before the pandemic in March 2020, buyers who put down a 10% deposit were better off over the course of twelve months. A saving of approximately £100 a month would see home owners save £1,200 a year.

However, last month the tables turned. Those renting their homes from the private sector are now saving approximately £71 a month. In 2020, it was cheaper to rent in every region of in the UK, whereas currently there are only four areas where it is cheaper to buy.

The switch comes as high demand, and a short supply of properties, have resulted in the prices of houses rising. Properties set a new record high in June last year, with an extra £3,000 added to the average cost of a house. According to the Halifax Price Index, the average cost of a house is now around £262,000.

While the pandemic saw rental prices drop as families favoured staying under one roof, it is now beginning to rise again. The average property now costs £43 pound (4.1%) more then they did in May 2019. The costs in South East and South West of England have reached a high of double figures – with the South East rising by 13%.

Will it continue to be cheaper to rent then buy?

Aneisha Beveridge is the head of research at Hamptons. She believes the reverse of a six year trend is due to the pandemic.

According to Mrs Beveridge a year ago, lenders were increasing rates or withdrawing higher loan to value mortgages together. This move has made it so first time buyers end up paying more then they would had they been renting the property.

She believes “the balance will swing back somewhat towards buying”. This is in part due to the mortgage prices coming down, although rising house prices may still act as a deterrent. The gap between rental and buying is continuing to close, despite higher interest rates then pre pandemic.

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