Are mortgage payments cheaper than rent in the UK?

When choosing your next home, there are several questions that you must ask yourself. Is it cheaper to continue renting? Would it be a more worthwhile investment to get a mortgage?

Finder research shows that renting is currently cheaper than a first-time buyer paying off a mortgage in 93% of British cities due to high interest rates. We take a look at the details below, including the cities where a first-time buyer mortgage is still cheaper than renting.

Mortgage vs rent: Key highlights

• The average mortgage payment in Britain for a first-time buyer is £1,422 as of April 2024, more expensive than the average rent of £1,293 in the same month.
• Rent is cheaper than monthly mortgage payments for first-time buyers in 99% of areas in England and Wales as of April 2024.
• The average 2-year fixed mortgage rate for a 15% deposit was 5.17% in March 2024.
• The average rent in London is estimated to be £2,086 per month.

Where are mortgage payments cheaper than rent?

Of the 318 local authorities analysed, mortgage payments for first-time buyers were more expensive than rent payments. Just three areas had cheaper average monthly mortgage payments: Newcastle, Manchester and Bristol.

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Verdict: Is it cheaper to rent or buy?

While buying a property requires a substantial upfront cost, it is typically cheaper than renting in the long term. This will vary depending on several factors, but renting usually becomes more expensive after 10-15 years.

It is also worth noting that at the end of the 30-year period, buyers will become owners of an asset, whilst renters will most likely have funded the mortgage repayments of their landlords.

However, monthly mortgage payments are currently higher than rent due to high interest rates. This is after paying a 15% deposit and any fees and costs associated with buying a house. So, first-time buyers should consider their options carefully when looking to buy, as it can be a costly investment.

How has the average cost of rent changed?

The average cost of rent for a property in Great Britain has been rising steadily over the past decade, reaching an average of £1,262 per month in May 2024. The average cost of rent has increased by 8.7% year-on-year since May 2023.

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What is the average rent in London?

The average rent in London in May 2024 was £2,086 per month. This is 165% of the average rent in Great Britain, with residents in the capital paying over £800 per month more than the average Brit.

What are the advantages of renting?

• Less responsibility. Broken shower? Not your problem. There’s your landlord to fix that.
• Flexibility. Not sure where you want to settle? You can try out different areas and, in some cases, afford to live somewhere you couldn’t afford to buy. Rental contracts are typically 12 months long, so if you think you want to change location or your circumstances change, you can give your landlord notice and walk away.

What are the disadvantages of renting?

• Rising rent prices. In the current climate, rents are climbing. Zoopla has said that the average UK tenant now spends 28.3% of their gross pay on rent.
• Volatility. Rent can go up on the whim of your landlord.
• Lack of future value. You’re paying your landlord’s mortgage rather than your own, which means you’re not building up a potential nest egg for the future.
• Less freedom. You’ll also have to abide by your tenancy rules relating to things like owning pets or being able to decorate the property.

What are the advantages of buying?

• Future value. Buying your own property is an investment in the future. Your mortgage payments will be contributing to something that is yours.
• Asset. Further down the line, you could use the equity from your property to fund a larger house purchase or downsize to bolster your retirement fund.
• Freedom. You’ll also be able to decorate and modify your house to your liking.
• Stability. No landlord can turn around at short notice to ask you to leave. All in all, you have more control and more of a stake when it’s your own property.

What are the disadvantages of buying?

• Risk. Taking out a mortgage is one of the biggest financial commitments you’ll ever make. If you don’t keep up with your mortgage payments, your home could be repossessed. This not only means you lose your place to live, but this could also affect your credit score and future borrowing potential.
• Responsibility and extra costs. You’ll also be responsible for all the additional costs of owning a home. For example, you’ll need buildings cover and life insurance. That’s before any maintenance costs for your property.
• Less flexibility. Finally, owning a home gives you less flexibility, as selling up and moving is more expensive.

Expert analysis: Can you afford to buy?

Kate Steere

Editor

Buying a house is one of the biggest financial decisions you can make. You need to consider the initial deposit and mortgage payments, as well as additional fees and expenditures:

• Deposit. The most common deposit is around 15% of the purchase price.
• Mortgage repayments. It is important to consider your ability to keep up with mortgage rates, especially with variable interest rates.
• Stamp duty. Stamp duty is a required tax when buying a residential property. However, first-time buyers don't pay stamp duty on the amount up to £425,000.
• Other fees. There are legal fees that come with all the paperwork. House surveys and removal costs also add up to the bill.

The deposit, mortgage structure and all additional fees must be carefully considered before buying a home. Although becoming a property owner is desirable, you should balance the risk against the reward when deciding!

What other costs are involved in renting?

The cost of renting is relatively cheaper than buying a home, with the deposit being the biggest payment outside of rent.

Outside of monthly rental payments, tenants will have to pay a holding deposit and a security deposit. The holding deposit is usually a week’s worth of rent, which ensures your potential new home is secured, whilst estate agents check your references. Upon signing the tenancy agreement, a security deposit of not more than 5 weeks’ worth of rent is taken to protect the landlord against any damages and missing items.

Both of these deposits should eventually be paid back to the tenant. A holding deposit can be used as part of the security deposit once the tenant has passed reference checks. The security deposit is returned in full to the tenant at the end of the rental agreement. The cost of any damage caused by the tenant or any missing items will be deducted from the security deposit.

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