Renters paying 14% more a year than property owners

Published by Max Salsbury for 24dash.com in Housing and also in Finance

Renters pay out 14 percent more on average a year than those with mortgages, new research has revealed.

Those renting a two-bedroom flat can expect to pay out almost £1,000 more a year than if they were servicing a mortgage on it.

The research, carried out by property website Zoopla.co.uk, found that it is now cheaper to buy than to rent in 86 percent of the UK's cities.

The current average asking rent for two-bedroom flats nationally is £669 per month, compared to an average asking price of £140,692.

Servicing an interest-only mortgage at five percent would cost £7,035 pa - 14 percent less than the £8,028 paid by the average tenant for such a property.

And using a 90 percent loan to value interest-only mortgage at a typical Best Buy rate of 4.39 percent means the premium paid by tenants is even higher.

The average mortgage would stand at £126,623 with an interest cost of £463 per month, saving the average owner £2,463 a year (not including the cost of the 10 percent deposit).

A north-south divide has also emerged in the cost of renting versus buying.

Northern cities dominate the list of areas where it is the most cost-effective to buy - with nine out of the top ten places where it is cheaper to buy than rent being in the north.

Hull tops the list of the most expensive places to rent compared to buying currently.

Tenants there pay £2,855 a year more than owners - a rental premium of 62 percent.

York and Peterborough complete the top three list of places where buying beats renting hands down.

Southern towns feature much more prominently on the list of areas where it is actually cheaper to rent than buy.

In Swansea, owners pay £1,169 more per year than renters.

Bournemouth, Stockport, Dundee, Edinburgh, Plymouth and Huddersfield are the only other places in the UK where renting is currently cheaper than buying.

Lawrence Hall of Zoopla said: “As a general rule it is much more cost-effective to own a property than rent it. This is particularly true in the north, where a big gap has opened up between the cost of renting and owning. Would-be buyers in the north have found it harder to get a mortgage, which has forced more of them into the rental sector. This has had the dual effect of pushing up rents and keeping a lid on property values, making owing a great option, provided you can get a mortgage.”