A year ago renting in the UK was an average of £993 per year more expensive than servicing a mortgage but this gap has now come down by 3.2% to £961 today.
As a result, the proportion of towns and cities across the UK where it is cheaper to buy than rent has fallen from 90% to 86% over the past 12 months.
Lawrence Hall of Zoopla.co.uk said: “Buying remains significantly more cost-effective than renting, but the gap is closing.
“With increased mortgage availability buyer demand is rising, especially amongst first time buyers, whilst rental demand is falling so house prices are generally rising faster than average rents, although it is clear that large regional differences still exist.”
The main cause of the narrowing gap has been that house prices have climbed at a faster pace over the past year than rents with the cost of renting a two-bedroom flat across Britain now £84 (1.1%) more expensive on average than last year, whereas the cost of servicing an interest-only mortgage on a typical two-bedroom flat has risen by £120 (1.7%) on average.
Weaker house price growth in the north has meant that northern towns dominate the list of places where it is cheaper to buy than rent with York topping the list and where tenants pay a £3,326 (42%) annual premium over owners.
Higher property prices in the south have led to a number of places where it is cheaper to rent instead of buying with Plymouth topping the list with tenants in the seaside town paying £845 (15%) per year less than owners on average.
Despite the high rents in London property price rises over the past year in the capital have now made renting 6% more cost-effective than buying.
