UK

Renting Is 'Now More Expensive Than Buying'

16/02/2013 08:48 GMT

Renting a home is now more expensive than buying – even though most would-be purchasers are unable to get on the property ladder.

According to new research buying a home has become £1,440 a year cheaper than renting.

The gap has widened in recent years amid house price falls and record low interest rates which have made borrowing cheaper for those who can get access to a mortgage, says Halifax.

Increased demand in the rental sector from those struggling to raise a deposit or meet lenders' borrowing criteria has pushed up rental costs.

Last month think tank Oxford Economics said that the average property price will hit £500,000 by the end of the decade, meaning many will be forced into more expensive renting.

Halifax said the average monthly costs associated with buying a three-bedroomed house stood at £621 in December, which is £120 cheaper than the typical monthly rent of £741 on a similar property.

Average buying costs include mortgage payments, income lost by funding a deposit rather than having savings and spending on repairs, using figures from Halifax's own database as well as official sources.

The latest figures are an about-turn from December 2008, when buying a home was £217 a month more expensive than renting.

Home buying costs have declined by one third (34%) over the past four years, while average monthly rents have been pushed up by 14%, the study found.

The gap between buying and renting has widened by £21 a month over the past year. At the end of 2011, the monthly cost of home buying was £99 lower than renting.

Buying is most affordable compared with renting in London, where the monthly difference is £193, while in Yorkshire and the Humber buying is just £1 a month cheaper than renting, Halifax found.

Martin Ellis, housing economist at Halifax, said that while the "financial attractiveness" of buying a home has improved in recent years, the tough economy is still holding would-be home buyers back.

He said: "Concerns over job security and raising a deposit are the main obstacles to people buying their own home.

"However, it is worth noting that once home buyers are on the first rung of the ladder, their monthly costs are notably lower."

Buying was found to be more affordable than renting in every UK region.

Housing Minister Mark Prisk said: "Today's figures show that Government-led efforts are working to help aspiring homeowners realise their dream of getting onto the property ladder, with the numbers of first-time buyers now at its highest level for five years.

"By tackling the deficit interest rates have been kept down, directly helping make home ownership a more affordable prospect.

"On top of this, the Funding for Lending Scheme has helped ensure affordability is now the best it's been since 2003, while the FirstBuy and NewBuy schemes are helping thousands of people buy newly-built homes with a fraction of the deposit they would normally require."