Monday, 27 September 2021

The tipping point for buying

A BUYER of an average two bedroom home would need a £32,400 (24 per cent) deposit to make the monthly costs of owning lower than renting, despite the lowest interest rates on record, according to research from leading residential agent, Hamptons International, which has an office in Hart Street, Henley.

When you compare the monthly mortgage costs of high loan to value mortgages (95 per cent LTV) typical of first time buyers with rents you find that buying a two-bed property in England and Wales is 11 per cent more expensive than renting it. Using this simple comparison of monthly rent to mortgage costs, renting is cheaper than buying at high LTV in almost every region of England and Wales. Only in the North East and North West is renting more expensive.

An individual’s choice of tenure, whether to rent or buy, depends on having sufficient income to service a loan, but also crucially on the amount of deposit available.

In order to understand this affordability “tipping point” between tenures, Hamptons International calculated the size of deposit required to make average monthly outgoings on buying lower than average rents on a similar property.

Across England and Wales, the tipping point is at a 24 per cent deposit, equivalent to £32,400, and monthly mortgage and maintenance payments of £669. This compares with average monthly rental payments of £683 on a similar property. The biggest percentage deposit required for the scales to tip in favour of buying is 29 per cent in the East Midlands.

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