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Landlords given a boost as data shows renting is 'cheaper than buying'

2-minute read

Mollie Millman

18 June 2021

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Renting a property is a cheaper option than buying one in most parts of the country, according to new research. This is the case for the first time since December 2014, the research by estate agents Hamptons International revealed.

It suggested that in May, tenants spent £71 less a month on rent compared to if they were paying for a mortgage where they had a 10 per cent deposit.

Changing fortunes during the pandemic

You only need to go back to March last year to see how quickly the situation has changed. Back then, on the eve of the pandemic, a buyer with a 10 per cent deposit would have been around £102 a month better off buying a home rather than renting.

Now it’s only cheaper to buy a home rather than rent in four regions, including the North East of England, the North West, Yorkshire & the Humber and Scotland.

London has experienced the biggest shift since the beginning of the pandemic, where a buyer with a 10 per cent deposit has gone from being £123 a month better off in March last year to spending £251 a month less on rental costs in May 2021.

Reversing a six-year trend

Aneisha Beveridge, head of research at Hamptons, said: “The pandemic has reversed a six-year trend which now makes it cheaper to rent than buy a home.

“A year ago, lenders were either increasing their rates or withdrawing higher loan-to-value mortgages altogether.

“For first-time buyers in particular this pushed up the cost of paying a mortgage, if they could get one at all, to well above the cost of renting.

“It is likely the balance will swing back somewhat towards buying, particularly as mortgage rates come down. However, this is likely to be partly offset by rising house prices. And while interest rates are falling, they’re still considerably above where they were pre-pandemic on higher loan-to-value loans.

“Despite this, we expect the gap between renting and buying to close over the remainder of this year, moving back towards longer-term levels in 2022.”

Renting rather than buying becomes even more attractive for those buyers with a deposit of only 5 per cent. These buyers will spend around £195 a month more on average than if they had carried on renting.

Record high rents

The average cost of renting a home reached a record £1,054 in May, up 7.1 per cent compared to the same time a year ago.

While rents bottomed out in May last year, the average rental home cost £43 or 4.1 per cent more than it did in May 2019.

Four of the country’s eight regions recorded rental growth last month, including the South East, the South West, the Midlands, and Scotland.

Rental costs in the South East and South West of England hit double digits for the second consecutive month, rising 13 per cent and 11.5 per cent respectively.

Meanwhile, London continued to be the only region where rents fell, down 0.5 per cent year-on-year.

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