Home ownership over £1,000 a year cheaper than renting

Renting in the UK has been found to cost significantly more per year than owning a home, according to new research from property website Zoopla.co.uk.

Indeed, the average rental payment on a two bedroom flat is £8,258 per year, £1,098 more than the cost of servicing a five per cent interest-only mortgage on a similar abode, which currently stands at £7,160 per year.

Buying property in Reading is most cost effective, with owners in the area paying 34 per cent less than tenants on average. However, the northern regions offer more benefits to homeowners than the south as it has become vastly cheaper to buy, with rental fees rising faster than house prices.

York, Peterborough and Hull are all in the top five for the most cost effective places to buy, while only Reading and Milton Keynes from the south are placed in the top 30.

According to the study, the savings that can be gained from buying instead of renting is equivalent to 4.2 per cent of the average full time salary in the country – around £26,200. Renting is now only cheaper in just six of the 50 largest towns and cities.

Of all the places where rent is still more cost effective, Swansea came out on top, with people paying 11 per cent less on average.

One interesting finding is that renting in London has become a better option than buying thanks to rapidly increasing house prices, which have risen 5.9 per cent on average over the last 12 months. Tenants in the capital now save 9.5 per cent a year over buyers

Lawrence Hall of Zoopla.co.uk said: "Despite the improved first-time buyer market over the past year, demand for rental accommodation is still fierce. Thousands of people who want to buy are still being forced into the private rented sector every month, which is pushing rents up."

Though renting is more expensive for most of the country, it is not easy to get in the property ladder, especially when lumbered with a large amount of personal debt.

Indeed, the price of deposits for mortgages remains the main barrier to home ownership in the UK property market, according to Santander.

A new survey from the bank found 16 per cent of individuals in the UK still see it as the main barrier to them buying a home. It is a particularly large stumbling block for younger aspirants, with 32 per cent of 18 to 34-year-olds unable to buy because they cannot get a deposit.

The costs of deposits have in fact been decreasing as a result of the Funding for Lending and Help to Buy initiatives. However, it is still very difficult despite this and many are wary of the proposed increase in the Bank of England's interest rates.

Phil Cliff, director of Santander Mortgages, said: "The UK has seen a number of encouraging economic statistics emerging in recent weeks and months and our findings suggest a significant increase in confidence in the housing market." 

By James Francis