Hamptons research finds owning costs more than renting in most of Great Britain

Renters with a 5% deposit taking out a 95% loan-to-value mortgage would need to spend an average of £300 more on monthly repayments than their current rent, according to research from the estate agency Hamptons reported on 22 June 2024¹. The figures are based on a two-year fixed-rate mortgage over a 30-year term¹.

Owning is cheaper than renting in only two parts of Great Britain: Scotland, by £16 a month, and the North East of England, by £59¹. Hamptons said the increase in the monthly cost of buying with a small deposit has made purchases unviable in most places south of Birmingham¹.

Bank of England data shows the average rate on a 95% mortgage is just over 6%¹. Hamptons says this would need to fall to 4.2% to equalise the cost of buying and renting, and to 3.6% in London¹. Hamptons said that when rates were lower, a buyer with a 5% deposit would usually pay the same or less on mortgage repayments as on rent¹.

Rents across Great Britain averaged £1,337 in May 2024, up 6.3% year on year, while rents for tenants renewing existing contracts rose 8.8%¹. Hamptons attributes the slowdown in rent rises largely to inner London, where prices fell 2.3% year on year¹.

Source: Hamptons data reported by Which?, 22 June 2024¹

Why it matters for households

For a renter with a 5% deposit, the monthly payment on a 95% loan-to-value mortgage is on average £300 higher than the rent they pay now, so the immediate cost of getting on the ladder is higher in most of Great Britain¹. The gap is widest in more expensive areas such as London and the South East, and narrowest in Scotland and the North East, where owning is £16 and £59 a month cheaper respectively¹. The comparison covers mortgage repayments against rent only; it does not include other costs of ownership such as the costs of buying a house or ongoing household bills¹.

Lenders stress test mortgage applications at higher rates than the deal rate, which can affect how much a household with a small deposit can borrow¹. The size of a deposit determines the loan to value ratio and therefore the rate available¹. Schemes for buyers with small deposits include the Mortgage Guarantee Scheme and first-time buyer schemes in England, Scotland, Wales and Northern Ireland, and deposits can in some cases be gifted¹.

Renters renewing existing contracts saw larger increases, at 8.8%, than the 6.3% average for new lets, and smaller homes saw larger rent increases amid greater competition for more affordable properties¹.

What happens next

Which? reports that the Bank of England is likely to start cutting the base rate soon, which should see mortgage rates drop a little, though large cuts are unlikely¹. It also notes the prospect of the upcoming general election, with the next government potentially introducing policies that could help first-time buyers¹. Hamptons' Aneisha Beveridge said the extent to which the Bank of England reduces rates will shape the numbers of buyers with small deposits more than even the best-designed government policy¹. No date has been reported for a base rate decision or for any new first-time buyer policy¹.