Mortgage Rates Soar: Renting Remains Cheaper than Buying in UK
The UK mortgage market is experiencing a significant shift, with renting becoming a more affordable option than buying a home. This trend is largely attributed to the surge in mortgage rates, which have made it increasingly difficult for prospective buyers to secure a mortgage.
According to recent data, would-be homeowners with a five per cent deposit are currently paying an average of £300 more per month in mortgage repayments than they would if they continued renting. This financial burden is most pronounced in London, where buying a house costs an additional £775 per month, or £9,300 annually, compared to renting.
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 more challenging for buyers to enter the market. This upward trend is expected to continue, with the Bank of England’s interest rate hikes putting additional pressure on households.
“High mortgage rates have squeezed buyers with small deposits out of the market, forcing more households to rent for longer.” - Aneisha Beveridge, Head of Research at Hamptons
The situation is further complicated by wage stagnation and economic turmoil, which have made it difficult for buyers to save for a deposit. As a result, many are being forced to rent for longer, with the share of mortgages in arrears continuing to rise.
In response to this crisis, Labour leader Keir Starmer has vowed to work with local authorities to give first-time buyers priority on homes. He has 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.
Meanwhile, 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.
Renting remains cheaper than buying with a 5% deposit, Hamptons
The rental market is also experiencing significant growth, with annual rental growth averaging around seven per cent across the nation each month this year, according to Hamptons. This surge in rental prices, particularly for smaller properties, is making it even more challenging for renters to find affordable housing.
As the UK grapples with this housing crisis, it remains to be seen how the government and industry will respond to address the needs of would-be buyers and renters alike.
Mortgage rates soar, making renting a more affordable option
In related news, Dudley Building Society has lowered rates across its mortgage retention range by up to 0.70%. The mutual has dropped rates on selected fixed and discounted products across its residential, buy-to-let, holiday let, and expat range.
Dudley Building Society cuts mortgage retention rates
The Scottish Mortgage Investment Trust has also seen its share price recover from its post-pandemic lows, up 30.5% over the past 12 months. The trust’s net asset value (NAV) per share has grown by over 20% in a year, driven by improving sentiment and forecasts for the sectors in which the trust invests.
Scottish Mortgage Investment Trust share price recovers
As the UK housing market continues to evolve, one thing is clear: renting has become a more affordable option than buying for many. As the government and industry respond to this crisis, it remains to be seen how they will address the needs of would-be buyers and renters alike.
