Zoopla.co.uk, which lists over half a million properties for sale or to rent in Britain, analysed the asking prices and rents for all two-bedroom flats currently on the market, comparing the rental cost to the cost of ownership based on servicing an interest-only mortgage at 5% p.a.
Milton Keynes topped the list of locations where buying beats renting with current rents more than 39% higher than the cost of owning, leaving renters on average £2,544 per year worse off. At the other end of the scale, renting remains more cost-effective in Aberdeen, where it costs 9% more to own compared to rent, leaving owners on average £936 worse off.
In London, where the average asking price for 2-bedroom flats currently stands at £430,608, buying still beats renting by a significant margin. The average monthly rent in the capital today is 28% higher than the cost of ownership, leaving renters paying an extra £5,964 annually compared to owners.
Nicholas Leeming of Zoopla.co.uk, said:
“With house prices down, low interest rates and sky high demand in the private rental sector, buying has never been a better option for those able to secure a mortgage. And with owners reducing prices further in order to achieve a sale before Christmas, there may well not have been a better time to buy in recent times.”
Richard Sexton, director of e.surv chartered surveyors, said, “The cost of renting will continue to rise until the banks can offer more appropriate mortgage products to buyers. At present, the banks are being held back by weak economic growth and the spectre of a double-dip recession, as well as the regulator’s insistence they hold more capital. They’re in no mood to target first time buyers. There is some light at the end of the tunnel. Our data shows mortgage lending criteria have loosened marginally at the bottom end of the market as lenders begin to make grabs for a larger share of the market. But while more buyers able to secure a deal with an 85% or higher LTV than at any point since May 2010, this is not happening on a large scale. As a result, it’s barely rippling the surface of the ocean of would-be buyers who are being forced to rent while lenders continue to demands big mortgage deposits.”
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