The cost of the average new mortgage payment has overtaken the average rent for the first time since June last year, according to analysis by Rightmove
Renting a home in Britain is now cheaper than buying (Image: PA)
Renting a home in Britain is now cheaper than buying following a sharp increase in mortgage rates since the war in Iran, new figures reveal.
The cost of a typical new mortgage payment has surpassed the average rent for the first time since June last year, according to analysis by Rightmove.
The property website found that the average advertised monthly rent across Britain currently stands at £1,547. This was £123 lower than the average new monthly mortgage payment of £1,670.
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Rightmove’s mortgage figure is based on the current average asking price for a home of £373,971 and the average two-year fixed rate in April so far. It also assumes a buyer has a 20 per cent deposit and a 30-year term to pay off their mortgage.
The change has been driven by borrowing costs climbing higher since the beginning of March, when conflict escalated in the Middle East.
This caused swap rates, which are used by lenders to price mortgages, to rise amid volatility in the financial markets, prompting lenders to withdraw a raft of mortgage deals from the market.
As a result, the average two-year fixed mortgage rate has increased from 4.24 per cent in February to 5.35 per cent in April, Rightmove said.
However, a number of banks and building societies have been reducing their rates over the past few days, signalling a more optimistic mood entering the market.
Colleen Babcock, Rightmove’s property expert, said: “Mortgage payments have risen quite sharply in a short space of time for new buyers. It will be interesting to see whether more would‐be buyers turn to renting temporarily while rates remain high, particularly when monthly costs can exceed average rents and the timing of rate cuts is still unclear.”
Rightmove’s research reveals that while renting is less expensive than a mortgage on average across Britain, this is not the case in Scotland and the North East, where purchasing a property remains the more affordable option.
The disparity between rental costs and mortgage repayments also differs considerably across various regions of Britain.
In the South East, the average monthly rent is £304 lower than the average mortgage payment. This figure increases to £362 in London.
By contrast, in the North West it is just £7 cheaper to rent than to buy, according to the research.
Additionally, factors such as purchasing a property with a larger deposit, borrowing a smaller sum from the bank or spreading repayments over a longer term can all reduce monthly mortgage costs on an individual basis.
Nathan Emerson, chief executive of Propertymark, said: “This shift highlights the wider economic pressures facing consumers, where affordability challenges are being felt across both renting and buying.
“While renting may appear comparatively cheaper in the short term, it does not necessarily mean it is more affordable overall, particularly as tenants continue to manage the cost of living and limited housing supply.”