Renting vs Owning - Where In The UK Is It Cheaper To Rent Or Own A Mortgaged Property?

Recent research compiled by bridging loan brokers Finbri discovered which countries in the UK currently it's cheaper to rent than own, and where it's cheaper to own than rent.

As the UK housing market is so entwined with the bridging loan market, we wanted to do a deeper dive and review how owning vs renting in the UK has changed over the last year.

This is news that would be welcome news for buy-to-let investors as it could further increase the demand for rental properties in England and Wales as people, on average, find the cost of mortgages to be higher than rent payments.

Renting vs Owning - average UK monthly costs

UK Country	Property Price (average)	Monthly Mortgage Repayments (average)	Monthly Rental Payments (average)	£ Difference (Mortgage vs Rental Payments)	% Difference (Mortgage vs Rental Payments)	Result
England	£311,309	£1,434	£1,144	Mortgage £290 more per month	Rental payments 25.4% cheaper	Cheaper to rent than own in England
Wales	£216,960	£999	£863	Mortgage £136 more per month	Rental payments 15.8% cheaper	Cheaper to rent than own in Wales
Scotland	£195,781	£902	£952	Rent £50 more per month	Mortgage 5.5% cheaper	Cheaper to own than rent in Scotland
Northern Ireland	£179,530	£827	£887	Rent £60 more per month	Mortgage 7.3% cheaper	Cheaper to own than rent in Northern Ireland

_{Source: HomeLet Rental Index October 2023, House Price Index 2023}

_{Based on: An average property price, homeowner repayment mortgage at 75% LTV, with October 2023's average 5.5% interest rate, and a 25-year term.}

_{A version of the table first appeared on Finbri.}

Renting vs Owning - annual cost difference

On average, in England, it's cheaper to rent than own by £290 per month - Homeowners currently pay £3,480 more per year for their property than renters.
In Wales, it's cheaper to rent than own by £136 per month - Homeowners pay £1,632 more per year than renters.
In Scotland, it's cheaper to own than rent by £50 per month - Renters pay £600 more per year than homeowners.
In Northern Ireland, it's cheaper to own than rent by £60 per month - Renters pay £720 more per year than homeowners.

Deeper dive: Renting vs Owning in England - key findings

It's currently cheaper to rent than own in England.

However, rental prices have increased across England annually by 9.78%.

It's cheapest to rent in the North East with average monthly fees of £671 (a 10.5% annual increase), and unsurprisingly, it's most expensive to rent in London. London's average rent of £2,125 (a 9% annual increase) is the highest across the UK.

With rates increasing and making it harder for people to afford their mortgage payments, Zoopla has revealed sellers are now accepting discounts of £18,000 on average, and the Land Registry says the average price of a property in England fell by 1.4% between October 2022 and 2023.

Deeper dive: Renting vs Owning in Wales - key findings

It's cheaper to rent than to own in Wales.

In Wales, average rent has increased 10.7%. In the capital, Cardiff, rent has risen above the average. Renters in Cardiff pay £1,065 per month, an annual increase of 11.8%.

Land Registry data shows the average property price in Wales fell by 3.02% between October 2022 and 2023.

However, with the average rent across Wales at £863 per month, despite the rental increase and property prices falling by 3%, renting is still cheaper than the average monthly mortgage payment, which is currently £999.

Deeper dive: Renting vs Owning in Scotland - key findings

It's cheaper to own than rent in Scotland.

Zoopla has revealed rental prices have increased by 12.9% annually.

Looking at Scotland's 3 largest cities by population (Glasgow, Edinburgh and Aberdeen), there are vast differences between the average rental price.

According to Zoopla's December Rental Market Report, the average rent in Edinburgh is £1,259 monthly. This is £329 more expensive per month (£3,948 more per year) than Glasgow at £930 per month. Aberdeen's rental price is even lower, at £673 on average per month.

That means if you rent in Aberdeen, you'll spend £7,032 less per year than people who rent in Edinburgh and £3,084 less than renters in Glasgow.

The current monthly mortgage payment of £902 is £50 cheaper than the average rent of £952. Homeowners pay 5.5% per month less than renters.

The Land Registry says the average price of a property in Scotland stayed similar year-on-year and showed a slight increase of 0.15% between October 2022 and 2023.

Deeper dive: Renting vs Owning in Northern Ireland - key findings

It's cheaper to own than rent in Northern Ireland.

Belfast is the most expensive place to rent a home in Northern Ireland at £762 on average per month. This was an annual increase of 3.2%.

But this 3.2% increase in Belfast was the lowest amongst all major UK cities, and of those cities, only Aberdeen has a lower average rent (£673 in Aberdeen vs £762 in Belfast).

Whilst the Northern Ireland House Price Index shows that between Q3 2022 and Q3 2023, the house price index increased by 2.1%, the current average monthly mortgage payment of £827 is £60 cheaper than the average rent of £887. Homeowners pay 7.3% per month less than renters.

Conclusion

The property landscape in the UK is constantly evolving.

Zoopla's recent Rental Market Report found that UK average rental prices have increased 9.7% annually. And whilst house prices have fallen, mortgage rates skew the actual cost of owning a home.

Based on their own mortgage approvals, the most recent Nationwide and Halifax house price indices suggested that house prices fell by between 1% and 2% in the year to November.

Since the disaster that was the Mini-Budget of September 2022 (that quickly resulted in the dismissal of the Chancellor of the Exchequer, Kwasi Kwarteng and the resignation of Prime Minister Liz Truss), owning a house with a mortgage has become more expensive.

Earlier this year, average mortgage rates jumped to their highest level since August 2008, during the financial crash. The average two-year fixed rate back then was 6.94%. Whilst mortgage rates have fallen since the summer. In July, the average two-year fixed rate climbed as high as 6.86%. Today, it's 5.95%.

If inflation continues to fall, industry insiders are optimistic that average mortgage rates could fall below 5% again in 2024.

Key predictions believe that in 2024...

The latest Monetary Policy report says interest rates are expected to remain around 5.25% until 2024 Q3 and then decline gradually to 4.25% by the end of 2026.
- This prediction means it's highly likely mortgage rates will also remain at or around current levels.
House price predictions differ, but the latest outlooks are as follows...
- HSBC and Nationwide predict prices will remain broadly the same.
- Property portals Rightmove and Zoopla forecast decreases of 1% and 2%, respectively.
- Halifax predicts prices will fall by between 2% and 4%.
Zoopla predicts rental fees will increase, but less rapidly than recent increases. They state that the UK rental market has now passed peak growth, and they expect rents in 2024 to halve to a growth rate of 5%.

The housing market is a crucial factor within the bridging market, as most bridging loans are secured against property. Homeowners, renters, property investors & buy-to-let landlords will all be impacted by rate changes and their knock-on effect on monthly mortgage rates and rental fees.

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