The research has highlighted that rising house prices and rising Bank of England base rates have closed the gap between buying a home and renting one, and it is now only £5,811 cheaper to buy rather than rent over a 25 year period.
In the last year the gap has significantly closed, dropping by 76 per cent from the high of £24,000. Today the average cost of renting for 25 years is £443,736 while to buy a home over the same period it will cost £437,925 – a saving of £5,811 or 1.3 per cent.
Regional differences do have their part to play though. Renters are better off in Northern Ireland, Wales and the North West, while buyers come up trumps in East Scotland and the North. In Yorkshire, London and the Midlands both buyers and renters pretty much break even.
At the end of the day, while the cost of renting and buying is converging, this does not account for the fact that with a repayment mortgage, you end up owning the property when the 25 years are up. In addition, homeowners benefit from any capital appreciation which might be earned during that period.
Nici Audhlam-Gardiner, head of Mortgages at Abbey said: “A number of factors have come together to cause rent over 25 years and a mortgage for the same period to converge across the UK. But while on a month-to-month basis in some areas it is cheaper to rent rather than buy, at the end of the 25 years a homeowner actually has a house whereas a renter has nothing. In addition, homeowners benefit from any further house prices rises as the value of their equity increases over time.
“So despite the convergence, we believe that people are still better off owning a property. The people who really struggle however are first-time buyers who find it difficult to get on the property ladder. We think it is the role of mortgage lenders to come up with new initiatives so that more people can achieve their dreams of owning a home.“
