NOVEMBER 08, 2016 | BY A & S Property
Renting is now cheaper than buying in 84% of UK

It is now cheaper to make monthly rent payments than pay for a mortgage in 84% of the UK, new figures show. 

The average monthly rent in the UK is now £885 per household, compared to an average monthly mortgage repayment of £998 for households paying off a mortgage, according to new data from credit scoring company Experian. 

It is cheaper to rent than buy despite the fact that the research also shows that in 137 - 36% - districts the cost of renting had increased in the third quarter year-on-year, while mortgage payments had fallen. 

The reverse was true in only 16 - 4% - of areas, which Experian suggests shows the balance across the country is shifting towards mortgage payments becoming more affordable compared to those who are currently renting. 

The credit scoring firm is trying to encourage mortgage lenders to recognise rental payments when making lending decisions, with Experian’s ‘First-Time Buyers Index’ showing that private tenants paid more for their accommodation in 57% - 217 - of districts during the third quarter of this year, compared to the same period in 2015.

The company also points out that the amount renters pay for their accommodation is either above or within 10% of the monthly payments they could expect to pay for a mortgage in 27% of UK districts (103). This suggests that, if they could raise a deposit, many of the UK’s 4.3 million private renters would find monthly mortgage payments to be manageable and in line with their current rental commitments.

Experian’s Jonathan Westley said: “What our research shows is that while a mortgage is a major on-going commitment, renters often have a track record of making monthly payments which are often similar to what they might pay on a mortgage.

“Lenders already apply rigorous checks to assess whether mortgage payments will be affordable for would-be homeowners, following the Mortgage Market Review. However, by taking rental payments into account, lenders can get a more complete picture of a borrower’s financial track record and make more suitable lending decisions.”

 

Experian, which is trying to promote its Rental Exchange, a joint initiative with Credit Ladder, designed to help renters get a mortgage by strengthening their credit histories, report that Scotland is home to six of the 10 districts where rental rates exceed monthly mortgage payments by the greatest margin.

Manchester, Salford and Hull in the North of England also offer among the most favourable conditions for renters to become first-time buyers.

Westley continued: “Lenders take more into account than simply the amount you have raised for a deposit and what multiple of your earnings you are looking to borrow.

“The responsibility of ensuring mortgage payments are affordable for borrowers in the long-term is one lenders take seriously. They want to get a complete picture of a would-be homeowner’s financial commitments and see a strong track record of making regular payments. This helps lenders to understand how a borrower would manage mortgage payments now and in the future.”

Rent and mortgage payment comparisons in UK for Q3 2016

 

 

 

Number of districts

% of districts

Cheaper to rent than buy

321

84%

Cheaper to buy than rent

51

13%

Rental payments - increased

217

57%

Rental payments - decreased

66

17%

Rental payments - no change

100

26%

Mortgage payments - increased

119

31%

Mortgage payments - decreased

248

65%

Mortgage payments - no change

16

4%

Rent & Mortgage - Both Increased

80

21%

Rent & Mortgage - Both Decreased

50

13%

Rent Increased, Mort Decreased

137

36%

Mort Increased, Rent Decreased

16

4%

 

Top 10 districts where rental payments exceed mortgage payments by % difference

District

£'s Difference rental v mortgage payments

% Difference rental v mortgage payments

Median Rental Payment

Median Mortgage Payment

Overall

-£113

-13%

£885

£998

Glasgow City

£179

28%

£650

£471

North Ayrshire

£111

25%

£450

£339

Merthyr Tydfil

£116

24%

£475

£359

North Lanarkshire

£112

24%

£475

£363

West Dunbartonshire

£106

22%

£485

£379

Dundee City

£101

20%

£500

£399

Manchester

£156

20%

£795

£639

Falkirk

£81

17%

£475

£394

Salford

£116

17%

£695

£579

Hull

£76

 

 

 


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