Renting Remains Cheaper than Buying in the UK as Mortgage Rates Soar

As mortgage rates continue to rise, the dream of homeownership seems to be slipping further out of reach for many. According to the latest Hamptons Monthly Lettings Index, renting remains significantly more affordable than buying a home with a five per cent deposit in the UK.

Mortgage rates have squeezed buyers with small deposits out of the market

The financial burden is most pronounced in London, where buying a house costs an additional £775 per month, or £9,300 annually, compared to renting. This is a staggering amount, and it’s no wonder that many would-be homeowners are being forced to rent for longer.

London renters are feeling the pinch

The average two- and five-year fixed mortgage rates have risen to 5.93 per cent and 5.50 per cent respectively, making it even harder for buyers with small deposits to get on the property ladder. To equalise the cost of renting and buying, mortgage rates would need to drop to around 4.2 per cent.

Mortgage rates continue to rise

It’s a tough period for prospective buyers, who remain stuck in the rental market due to wage stagnation and economic turmoil affecting mortgage rates. The Bank of England’s interest rate hikes have increased pressure on households, with the share of mortgages in arrears continuing its ascent.

Rental prices continue to rise

Life is not much better for renters either, as competition for affordable places to live is also driving up rental prices, especially for smaller properties. Annual rental growth averaged around seven per cent across the nation each month this year, according to Hamptons.

Rental growth continues to rise

In his party manifesto, Labour leader Keir Starmer vowed to work with local authorities to give first-time buyers priority on homes. He also promised to introduce a permanent, comprehensive mortgage guarantee scheme to support first-time buyers who struggle to save for a large deposit, with lower mortgage costs.

Labour leader Keir Starmer promises to help first-time buyers

The Conservatives have extended their mortgage guarantee scheme, aiming to help over 80,000 buyers in the next five years, and to increase the number of available 95 per cent loan-to-value deals. However, the effectiveness of these schemes will likely be determined by the Bank of England rather than Downing Street.

Mortgage guarantee schemes aim to help first-time buyers

In conclusion, the current state of the housing market is bleak, with mortgage rates soaring and rental prices rising. It’s a tough time for would-be homeowners, and it’s clear that something needs to be done to make homeownership more accessible.

The housing market remains challenging