Due to the rise in mortgage rates, for many, it’s now cheaper to rent a London home than it is to buy one. London and the southeast remain the areas suffering most from higher mortgage rates, but it still costs less to buy in the north of England and Scotland. Richard Donell, head of insights at Zoopla, told the BBC, ‘Around the country, the picture varies, as in areas with lower house prices buying is still cheaper than renting. In southern England where prices are higher, homeownership is most out of reach and rents are high as well.’
HomeLet CEO Andy Halstead said it was still too early to ascertain whether the relative rent stability we’re currently seeing would continue into next year, or will instead be a temporary winter dip. He said, ‘It is a little early to predict whether this will be a sustained pattern or whether London will follow the pattern of the wider country and see prices rise again in the coming months.’ He went on, ‘As a wider point, the rental market continues to suffer from a lack of available properties to meet surging demand, with many landlords choosing to leave the market.’
Meanwhile, Zoopla based its current calculation on the value of the average UK home. This amounts to £263,000 when a first-time buyer has put down a 15% deposit of £39,000. The average rental cost was then compared with the average monthly mortgage payment. This resulted in the biggest difference taking place in London, where the average house price is around £552,000, which results in the average rent coming in at £493 less each month than a mortgage payment.
According to the Resolution Foundation’s annual Living Standards Outlook for 2023, the cost of living crisis is expected to ease in 2024, although it won’t be completely over until wages catch up, something that isn’t expected to happen until 2027. If London rents do rise going into next year, Mayor Sadiq Khan has called for rent controls, as private renters make up nearly a third of everyone living in the capital. Despite rents being cheaper than mortgages, the fact remains that, excluding London, the average monthly rent being asked of new tenants remains at a record high.
Sources: The Guardian, City A.M., The Evening Standard