Shocking new report reveals renting is now cheaper than first-time mortgages for the first time in 13 years

Is renting better than buying? It might just be as there has been a new development in the eternal renting versus buying debate. This comes as Zoopla reports shocking new statistics showing that on average, renting is cheaper than mortgage repayments for first-time buyers in the UK. 

Despite rent prices skyrocketing all over the country, it turns out that the typical UK monthly rent is £122 lower than first-time mortgage repayments. Mortgage rates continue to soar, which pushes repayments up. 

The last time renting was cheaper than buying was 13 years ago, in 2010, in the middle of the recession. For the past decade, we were used to the fact that buying was cheaper than renting due to ultra-low mortgage rates. 

But there is a silver lining, as this is not necessarily the case for all areas of the UK. The most affected regions are London and southern England, followed by East England and the Midlands. Meanwhile, Scotland, Wales, Northern Ireland and the North of England remain some of the cheapest places to buy and rent in the UK and where buying is indeed still cheaper than renting. 

To make sense of the situation we’ve consulted property and investment experts who shed some light on what this means for potential first-time buyers.

Renting is cheaper than first-time mortgages 

Zoopla’s report states that the average monthly rent in the UK comes to £1163, while the average monthly mortgage repayment has been calculated at £1285 on a 15% deposit, which is where the £122 difference figure comes from. According to the online real estate company, buyers in the South of England need to pay higher deposits of 31% on average (amounting to £42,000) to match the mortgage repayments with the typical monthly rent prices.  

But London in particular is the worst off as the average rent is £2053 and the average monthly mortgage repayment is £2546, which results in renting being cheaper by £493 a month.

'Despite rents rising over recent months, mortgage rates have risen even quicker and this has reversed the trend making it now cheaper to rent than buy across a number of areas around the UK for the first time in 13 years,' says Liz Hunter, director at Money Expert.

According to Rightmove, the current average five-year fixed mortgage rate is 5.79%, compared to 3.89% just a year ago. The average two-year fixed mortgage rate is even worse, set at 6.4%, while last year it was 3.77%. This is down to the rising interest rates to tackle high inflation.

Should you buy or should you wait?

This sadly means that home ownership is increasingly more unrealistic for most first time buyers. As if it wasn’t difficult enough already.  

‘There’s no debate that it’s a tough housing market for first-time buyers, with high mortgage rates pushing up costs for those attempting to step onto the ladder,’ confirms Izabella Lubowiecka, senior property researcher at Zoopla.

She continues with some owning and renting solutions and trends Zoopla has been seeing. ‘It’s worth noting that not all first-time buyers view buying a home as an ‘investment’ in pure financial terms, and we don’t expect their numbers to dip significantly - they currently account for one in three home purchases. What we’re seeing is first-time buyers get more creative with their home move - considering alternative areas to start their search, looking for more modest properties or buying with friends or family.’ 

So is now a good time to buy a house or should we wait it out? Jason Hollands, managing director at Bestinvest, shares his thoughts on the matter.

‘Given current high financing costs, current economic uncertainties and falling property prices, it may be better to hold off purchases and wait if you are able to do so. If you are going to push ahead with a purchase, I would avoid locking into high rates for longer periods such as five years. 

'It may be better to put up with the shorter-term pain of even higher rates but with the flexibility to re-mortgage in two years’ time when interest rates are expected to have retreated a little.’

The trend might even reverse before then according to Liz from Money Expert, 'Experts also suggest that rents will continue to grow, so this trend could potentially reverse again before the end of 2023 making it cheaper to buy than rent. That said, housing costs across the South of England will remain a problem for both renters and buyers for some time given the acute lack of supply of new properties.'

But there is hope after all as Izabella of Zoopla adds, ‘We also predict house prices will fall around 5% over the course of 2023, and mortgage rates may have already peaked, which might be the nudge many first-time buyers need to move ahead with their home hunt.’

Looking in areas of the country where buying is still cheaper is also a solution worth considering if you are looking to buy.