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10.10.2023
Renting now cheaper than first-time mortgages
The rise in mortgage rates means it is now cheaper to rent a home than to buy one for the first time since 2010.
The average UK rent is £1,163 per month, while average mortgage repayments are £1,285 for first-time buyers on a 15% deposit.
London and the South East are the worst affected locations for higher mortgage costs versus rent.
But it is still cheaper to buy in areas like northern England and Scotland.
The difference was most pronounced in London where the average house price is around £522,000. The average monthly rent is £493 less than the average monthly mortgage payment.
In Scotland, however, where an average home is £127,000, the average mortgage payment is £128 cheaper than the average rent.
Mortgage rates have risen as the Bank of England has lifted benchmark interest rates to tackle high inflation, which measures the rate at which prices rise.
The Bank has increased rates 14 times since December 2021, most recently from 5% to 5.25% the highest for 15 years.
There is uncertainty about what the Bank will do in the coming months, although financial markets think rates might be close to their peak.
Ways to save money on your mortgage
- Overpay now if possible: If you still have some time on a low fixed-rate deal, your mortgage could work harder for you now. Putting money in a savings account can build up and also earn interest to help to pay down some of the mortgage ahead of fixing a new deal.
- Switch to interest only: If you have an interest-only mortgage it means you are only paying the interest on the amount borrowed, and you are not paying down the size of the debt. But moving to an interest-only mortgage can keep your monthly payments affordable.
- Downsize: This is possibly not a realistic option for a growing family, or for the owners of a small flat. But for older mortgage customers whose children have flown the nest, selling up and buying a smaller property could reduce the mortgage size.
I am an Independent Financial and Mortgage Adviser and have worked in Financial Services for over 12 years. During my career I gained experience in assisting both individual and corporate clients.…
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