Soaring rents and falling mortgage payments have meant that it is cheaper to buy a home than to rent one in 13% of the UK, according to Experian. Over the past year, rents have risen across 217 districts, but mortgage payments have fallen in 248.
Experian found that in 51 of the 372 Local Authority districts in the UK, mortgage payments were actually lower than rents. In 137 districts – over a third of the total – the cost of renting a property has risen, year-on-year, in the third quarter – while mortgage payments have dropped.
Six of the ten districts where rent exceeds mortgage payments by the greatest margin are in Scotland. The median monthly rent in Glasgow is £650 – £179 higher than the median monthly mortgage payment which is £471. In Hull, Salford and Manchester, rents are over 15% more than the typical mortgage payments.
Experian’s findings suggest that a large proportion of the 4.3 million private renters in the UK could be better off buying than renting, if they could raise a deposit for their purchase.
At the moment, lenders do not take rental payments into account when assessing whether a borrower is likely to repay their loan. Experian thinks it would make sense for lenders to do this, going forward. The company has developed ‘Rental Exchange’ a service that allows rental payment information to be submitted to Experian in order to strengthen the renter’s credit history. This makes it more likely that the renter’s mortgage application will be approved.
There are currently around 2.5 million housing association tenants but only 90 or so of the 1,700 Housing Associations in the UK currently participate in the scheme. Experian believes their scheme gives lenders a more complete picture of a borrower’s financial track record and their credit worthiness.
If you are considering buying your first property or want to buy your Housing Association/Council owned home, get in touch with our property team for advice: