7 UK regions where it’s up to £250 a month cheaper to rent a property than buy

IT’S now cheaper to rent than buy in most places across the country because of surging house prices during the pandemic.

Monthly rent is as much as £250 less than the cost of monthly mortgage repayments, new research reveals.

Renting is now cheaper than buying in seven locations

The cost of renting works out as £1,054 per month, on average, according to Hamptons estate agents.

That compares to £1,125 for a mortgage for a first-time buyer putting down a 10% deposit.

The difference means the renter is now £71 a month better off compared to a homeowner.

Before the pandemic it was the other way round and the homeowner was better off by £102 a month compared to the renter.

What help is out there for first-time buyers?

GETTING on the property ladder can feel like a daunting task but there are schemes out there to help first-time buyers have their own home.

Help to Buy Isa – It’s a tax-free savings account where for every £200 you save, the Government will add an extra £50. But there’s a maximum limit of £3,000 which is paid to your solicitor when you move. These accounts have now closed to new applicants but those who already hold one have until November 2029 to use it.

Help to Buy equity loan – The Government will lend you up to 20% of the home’s value – or 40% in London – after you’ve put down a 5% deposit. The loan is on top of a normal mortgage but it can only be used to buy a new build property.

Lifetime Isa – This is another Government scheme that gives anyone aged 18 to 39 the chance to save tax-free and get a bonus of up to £32,000 towards their first home. You can save up to £4,000 a year and the Government will add 25% on top.

Shared ownership – Co-owning with a housing association means you can buy a part of the property and pay rent on the remaining amount. You can buy anything from 25% to 75% of the property but you’re restricted to specific ones.

Mortgage guarantee scheme – The scheme opens to new 95% mortgages from April 19 2021. Applicants can buy their first home with a 5% deposit, it’s eligible for homes up to £600,000.

In London the difference is even bigger. Renting is now £251 cheaper than owning – previously a homeowner would be paying £123 less than a renter.

There are seven regions in total where renting now costs less. Before the pandemic, it was always cheaper to buy than rent.

Here’s where it’s cheaper to rent than buy, and by how much on average:

London, £251
South East, £54
South West, £108
East, £117
East Midlands, £98
West Midlands, £35
Wales, £11

There are four places where the reverse is true and it remains cheaper to buy than rent: the North East, North West, Yorkshire and Humber and Scotland.

Renting also becomes even cheaper compared to the monthly repayments for a first-time buyer putting down a smaller deposit of 5%.

Renting works out, on average, £195 cheaper.

There is a bigger difference compared to a 10% deposit because interest rates are generally higher the smaller the deposit you have, and this increases the cost further compared to renting.

Homeowners have generally paid less than renters since 2014, Hampton’s research shows.

The cost of renting versus buying has switched since the pandemic

The exact price difference for individuals can depend on the type of home being bought or rented and a buyers circumstances, of course.

But the research signals a shift in the renting versus buying cost because of the pandemic.

A common gripe of wannabe homeowners has been that they are forking out for the higher cost of renting, when paying off a mortgage would be cheaper.

First-time buyers are often held back from buying by other mortgage requirements, like how much they earn and how much they can save for a deposit.

While the switch signals renting could now be cheaper than buying on a monthly basis, you won’t end up owning your own home when renting.

Don’t forget too that there are additional costs involved in owning a home on top of monthly mortgage repayments, like insurance, ground rent and decorating.

The cost of renting has increased by 7.1 % over the past 12 months, according to Hamptons’ monthly lettings index.

But the cost of homeownership has also increased over the same period for two reasons: strong house price growth and the increased cost of buying a home for first-time buyers.

Aneisha Beveridge, head of research at Hamptons, said: “The pandemic has reversed a six-year trend which now makes it cheaper to rent than buy a home.

“A year ago, lenders were either increasing their rates or withdrawing higher loan-to-value mortgages altogether.

“For first-time buyers in particular this pushed up the cost of paying a mortgage, if they could get one at all, to well above the cost of renting.”

Many lenders pulled mortgages from the market that required a smaller deposit of 5% at the start of the pandemic.

What is stamp duty?

STAMP duty land tax (SDLT) is a lump sum payment anyone buying a property or piece of land over a certain price has to pay.

Up until July 8 2020, most house-buyers in England and Northern Ireland had to pay stamp duty on properties over £125,000.

This was temporarily increased to £500,000 until March 31, 2021 in the government’s mini-Budget in July 2020.

The Chancellor extended the help until September 2021 in his Spring Budget.

The holiday will last in full until June, before being reduced to £250,000 from July.

The rate a buyer has to fork out varies depending on the price and type of property.

Rates are different depending on whether it is residential, a second home or buy-to-let, or whether you’re a first-time buyer.

The usual system in England for residential properties means:

First-time buyers pay nothing on properties below £300,000 (and relief available on properties of up to £500,000)
You pay nothing if the property costs below £125,000
You pay 2% if it is worth between £125,001 and £250,000
You pay 5% if between £250,001 and up to £925,000
You pay 10% if it is between £925,001 and £1.5million
You pay 12% on anything over £1.5million

For second homes or buy to let properties:

3% on purchases up to 125,000
5% on purchases between £125,001 and £250,000
8% on purchases above £250,001 and £925,000
13% on purchases above £925,001 and £1.5 million
15% on purchases above £1.5 million

Stamp duty rates are different in Scotland and Wales.

While some have now become available again, interest rates are generally higher.

Ms Beveridge said: “It is likely the balance will swing back somewhat towards buying, particularly as mortgage rates come down. However this is likely to be partly offset by rising house prices.

“And while interest rates are falling, they’re still considerably above where
they were pre-pandemic on higher loan-to-value loans.”

She added that the difference in cost between renting and buying was likely to close over the rest of the year.

House prices have shot up during the pandemic, thanks in part to the a stamp duty holiday.

The tax break, which can save buyers as much as £15,000, is set to end soon.

Tax on the first £500,000 of a home purchase has been scrapped thanks to the initiative, which was launched by Chancellor Rishi Sunak last year.

The stamp duty holiday is due to come to an end from June 30 2021.

From July, the tax-free threshold will drop for home buyers to £250,000 until September.