Are mortgage repayments now lower than rents?

A report on BBC ‘Breakfast’ TV this morning discussed that according to their research, the gap between the cost of renting a property and buying one, is narrowing. In 10% of the UK, they are suggesting it is cheaper to buy, than to rent.

Also according to the Halifax Building Society, more first time buyers have set foot on the housing ladder last year then since 2007. According to the Halifax the number of these first time buyers have reached 335,750 in 2016.

Certainly, at Bear Lettings Agents, we have seen rents rise in the South East even though they have dropped in London. Sam Mitchell, Head of Letting on Rightmove, states on the programme that rental supply has been affected by the 3% extra stamp duty on buy to let properties that came into effect last April with a glut of properties coming on to the rental market before that date.

This increase in supply led to a 4.4% decrease in rental prices in London.

 Sam Mitchell’s thoughts are that supply of rental properties will be affected adversely, by new lending criteria in which lenders want to see:-

1. The rental income needing to be 145% of the mortgage payment on a buy to let property.
2. The ‘stress test’ that checks the affordability to an individual should  mortgage interest rates rise will now be checked at a rate of 5.5%.
3. There are also income tax changes on the horizon in April.

When the supply for properties is short, prices go up whether they are for rent or for sale. It could be that more rental properties will become available on the housing market, enabling more first time buyers to climb on the property ladder.

If £190,000 is borrowed over a 30 year term to buy a property costing £210,000 then repayments would be circa £800 per month. It is possible to buy a 2 bed property for this in the south east. Approximate rental cost in the same area for a similar property would be circa £800pm too.

Whether you want to rent or buy a property, Bear Estate Agents and Bear Lettings Agents can help you.

Our Independent mortgage advisors can take you through everything that is available on the whole of the lending market, including Banks but not only Banks! They will explain more about ‘stress testing’ as well as ‘loan to value’ deals and will answer any queries you may have, in confidence. Call us today on 01702 811 211 for a FREE consultation.

Bear Estate Agents and Lettings staff are also happy to hear from potential tenants and landlords and will explain about their campaign for ‘Fairer Estate Agency Fees’.