Research from Zoopla.co.uk. found as prices rise and mortgage borrowers take out larger mortgage amounts, the number of towns and cities in the UK, where it is cheaper to buy than rent has fallen from 90% to 86% in the last year, said the property website.
A year ago, renting cost £993 per year on average more than servicing a mortgage, but this gap has fallen by 3.2% to £961 today. The average rental payment on a typical two-bedroom flat is £8,006 per year, compared to £7,045 per year to service an interest-only mortgage at a 5% rate.
Weaker house price growth in the north has meant that northern towns dominate the list of places where it is cheaper to buy than rent with York topping the list and where tenants pay a £3,326 (42%) annual premium over owners.
Lawrence Hall of Zoopla.co.uk said: “Buying remains significantly more cost-effective than renting, but the gap is closing. With increased mortgage availability buyer demand is rising, especially amongst first time buyers, whilst rental demand is falling so house prices are generally rising faster than average rents, although it is clear that large regional differences still exist.”
Alison Beech, managing director of Valunation said: “Looking at the data it seems there is a clear North/South divide when it comes to renting and buying. With average house prices continuing to rise in certain areas, renting can be financially more advantageous in London and the South East. However, if you are able to choose your area in London and even in the pricier areas of the South East then buying, particularly for first time buyers, appears more attractive than renting.”
