New survey reveals owning a house costs less than renting a property in the UKCurrent affairs
The cost of owning a family-sized home within the UK is now on average £1,500 per annum less than renting, according to research conducted by Halifax.
Halifax’s survey used standard three-bedroom family homes and calculated that on average the monthly cost of buying a home is £600 (16%) cheaper than the £715 it costs to rent the same property. In context, in 2008 the monthly cost of a home was £226 (26%) higher than the cost of renting.
The explanation: soaring rents across the UK, particularly within the London area where renting has increased on average £100 over the period since 2009.
Compared to renting in London the typical home buyer pays £188 a month, or £2,256 a year, less than the average tenant. These discrepancies are now pushing people back into buying rather than renting their homes.
“The affordability gains for buyers relative to renters in the last three years have been significant. The average mortgage payment has fallen dramatically over recent years as a result of falling house prices and mortgage rates. At the same time, rents have risen due to strong demand for rented accommodation,” claimed housing economist at Halifax Martin Ellis.
The Bank of England’s (BoE) base rate, which is still being held at its 2009 historic low of 0.5% has certainly helped keep mortgage payments relatively affordable over the period.
Government schemes such as Help to Buy have also helped those priced out of the market to enter into a mortgage arrangement. This stimulus, although necessary for UK citizens has been observed by experts to be dependent on the historic low base rate which will be forced to rise once unemployment falls below 7%.
BoE’s last inflation report in February puts UK unemployment at 7.1%, raising concerns for those who are being allowed with low down payments – as little as 5% – to enter into mortgage arrangements that might be left underwater once interest rates recover and mortgage payments increment upwards.