Most homes cheaper to rent than buy, even with large deposit

A third of homes currently for sale can be bought with a mortgage and monthly repayments that cost less than the average rent in the same area, says Zoopla. 

At a national level the average monthly UK rent is currently £93 per month (8%) more expensive than the average mortgage repayment for a first time buyer - an improvement since last summer when mortgage rates were 1% higher and it was cheaper to rent than buy. 

However, this research reveals there are some major variations around the challenges facing FTBs buying their first home. 

The research has found that whilst some regions have more affordable homes for first time buyers than others, it’s most likely urban areas where buying is cheaper than renting. Oadby and Wigston, a suburb of Leicester, has the largest proportion of for-sale homes (82%) with remortgage repayments lower than the local market rent. Ipswich in Suffolk comes second (80%) and North West Leicestershire (78%) comes third.

The majority of homes for sale in Manchester (62%), Newcastle (68%), Southampton (62%) and Sheffield (51%) are also cheaper to buy than rent thanks to an abundance of flats - the most common property type in these cities.

A deeper analysis of homes listed on Zoopla found that first-time buyers can find 150,000 homes (34% of the total listed) where average monthly mortgage repayments are lower than rents, assuming a 20% deposit. 

But it’s the North West, North East and Scotland that have the highest proportion of these homes. 

Over two-fifths of homes for sale in the North East (48%), Scotland (46%) and North West (44%) are cheaper to buy than rent with the monthly difference between the cost of renting and buying in these areas ranging between £240 and £425. 

However, the availability of affordable homes is at the highest risk of falling in these regions as house price inflation recovered earlier than in the southern regions of England. 

It’s a different story for first time buyers in the south of England and the Midlands, which have a lower share of homes listed for sale that are cheaper to buy than rent. 

Just a quarter (27%) of homes in the South West and a third (33%) of homes in the East Midlands have mortgage repayments lower than local rents, largely down to higher home prices in the region meaning that borrowing costs remain much higher. 

London also has a relatively high proportion of homes for sale where mortgage repayments are lower than rents - two in five homes listed on Zoopla here would have a lower mortgage repayment than the asking rent. 

This can be explained because the gap between rental inflation and house price inflation has been greatest in London over recent years - rents are up by 26.6%, while house prices have increased by only 8.9% over the past five years. 

Low price growth and higher rents ultimately means greater options for first-time buyers, although rents remain high in the capital. Nine out of 10 homes that are cheaper to buy than rent in London are flats, which typically come with a lower price tag. 

This is due to a larger difference between typical FTB monthly mortgage payments and monthly rent payments of £470 in inner London and £170 in outer London. 

This is not just the case for London too - potential homeowners keen to secure a mortgage with payments below local rents should look to flats with two in three flats currently available for less than local rent in their respective markets.