Despite politicians and campaign groups claiming that rental market is unaffordable, new research out today reveals that renting remains cheaper on average than buying a property with a 5% deposit.

Estate agency Hamptons says renting remains £300 a month cheaper than ownership, a gap that has been created by high mortgage rates following the Liz Truss-prompted economic meltdown two years ago.

The research shows that mortgage rates would need to fall from 6.1% to 4.2% to make the monthly cost of renting and buying in Britain similar, that the gap widens the further south you look; buying with a 5% deposit doesn’t work financially in most places south of Birmingham.  

In London, servicing such a mortgage would cost the average tenant an extra £775 per month.

The opportunity to get on the property ladder is being made harder for tenants since the Government ended the Help to Buy scheme. Its replacement, the mortgage guarantee scheme, has helped 85% fewer people buy a home.

Hamptons also says tenant are not helped by rising rents, which have surged by 6% over the past year with only inner London seeing rents fall (-2.3%) over the same period.

Squeezed

“High mortgage rates have squeezed buyers with small deposits out of the market, forcing more households to rent for longer,” says Aneisha Beveridge (pictured), Head of Research at Hamptons.

“Both the Labour and Conservative Parties have included mortgage guarantee schemes in their manifestos to boost the availability of 95% loan-to-value deals.  

“However, their effectiveness will probably be determined by Threadneedle Street rather than Downing Street.  The extent to which the Bank of England reduces rates will shape the numbers of would-be buyers with small deposits more than the best-designed government policy.”

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