Gap for Renting vs. Buying Widens
Research from Zoopla.co.uk suggests that renting is more expensive buying across 80% of the cities/towns in Britain, which is up 74% since July 2010. The average tenant pays 9.9% more than an owner with a 5% mortgage, whereas the previous gap was 8.7% in July 2010.
The underlying factors behind the widening gap between renting and buying are twofold: 1) The severe shortage in mortgage credit availability in limiting entry into home ownership; 2) The re-financing of existing homes with current low interest rates, which allow for lower ownership costs.
However, Zoopla.co.uk also states that the impact of a rise in interest rates could possibly change the scenario. A 1% increase in interest rates, with rent level unchanged, would make renting more cost-effective in 72% of the locations studied.
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