Mortgage costs exceed private rents

| October 5, 2007
”Mortgage

Hometrack, the property website, has concluded that the cost of renting a house in England and Wales is cheaper than the cost of buying a property with a mortgage.

Historically, most people have believed that renting a house was as expensive as buying one but house price inflation has changed that.

In 2006, the cost of a private rent was two-thirds the cost of a 100% mortgage on a two or three-bedroom house, for a young household on average incomes.

According to Professor Steve Wilcox of York University, who carried out the analysis for Hometrack, in many areas of the UK people who cannot afford to buy a house can still afford to rent in the private sector.

Average house prices have tripled since 1994, whereas private sector rents have increased more in line with earnings, so that relatively, the cost of renting a house has fallen.

Growth in the buy-to-let sector in the past decade has also helped to keep rents down.

At the same time, potential house purchasers have been afflicted by affordability issues, with the ratio of house prices to income nearly doubling in the past decade.

The Hometrack research shows the average cost of a home in England and Wales at £176,300, which is over five times the income of the average first-time buyer.

Some property experts prefer to measure affordability using mortgage costs as a percentage of income, and in the past 10 years this percentage has almost doubled, to over 32%.

The survey rated the London borough of Kensington and Chelsea as the most expensive area in which to buy a house, and Wansbeck in Northumberland as the cheapest.


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