The average monthly mortgage repayment for a first-time buyer in Great Britain is £1,038, 19% lower than the typical rental payment of £1,248.
According to data from Zoopla, this is based on a 20% deposit against an average first-time buyer property priced at £253,700.
It also coincides with a 32% increase in average rental payments over the last five years.
The gap between an average monthly mortgage and rent payment was found to be the largest in the North East, where mortgage payments were 24% lower than rents.
The smallest differences between the cost of renting and paying a mortgage were found in the East Midlands and the South East, both with a 1% gap.
The only region where renting was cheaper than paying for a mortgage was in the East of England, where mortgage repayments were 6% higher or £70 more than renting at £1,298 per month.
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Zoopla said that although the cost of paying a mortgage was lower than renting in most regions, buyers still faced affordability challenges.
It said an average 20% deposit ranges from £27,700 in the North East to £83,400 in London, noting that many first-time buyers relied on family help for the deposit.
Lenders stress testing mortgage applicants to see if they can afford payments if their interest rate was to rise to around 8% was a barrier, Zoopla said, as this saw many applicants who could comfortably afford to pay higher rents denied from getting a mortgage at a cheaper monthly cost.
Richard Donnell, executive director at Zoopla, said: “Our renting versus buying analysis is welcome news for would-be first-time buyers looking to buy their first home, having faced steep increases in rents over the last three years.
“There remain challenges facing first-time buyers, especially those on average incomes or with small deposits. Mortgage regulations introduced in 2015 to stop a housing market boom and bust have created a higher hurdle to homeownership for those on middle incomes, who can afford to make rental payments but are unable to prove they can afford higher mortgage ‘stress’ rates should borrowing costs increase in the future. The more first-time buyers priced out of homeownership, the greater the pressure on the private rental market and rental levels.”
Donnell added: “Proposals to review regulations around mortgages are welcome. We do not want to return to the loose lending that preceded the global financial crisis. A modest loosening in lending rules with mortgage stress testing rates closer to 6-7% would help more middle- to higher-income renters access homeownership and ease some of the pressure in the rental market without causing a boom in house prices.”
CEO appointment
Zoopla also announced the appointment of Paul Whitehead as its CEO, alongside a number of leadership changes.
Whitehead rejoined Zoopla, previously its chief strategy officer from 2015 to 2018. Whitehead left to become chief operating officer of car-buying platform Cazoo before progressing to become its CEO and overseeing the firm go into administration last year.
Zoopla has also hired Sam Fletcher as CFO, and she will work with Whitehead to execute the firm’s strategy.
Whitehead said: “I am delighted to return to Zoopla, a UK digital business with an incredible brand and consumer experience built over the last 17 years that attracts millions of consumers each month. My focus is on building upon the clear competitive advantage that Zoopla has in delivering high-quality buyers and vendors to our customers. Our customer wins this year speak volumes about the results Zoopla consistently delivers, as well as exceptional value and access to a powerful audience of serious homemovers.
“We have a long history of innovation in the property industry, which we’ll continue to build on as we further develop the leading platform for people looking to move home.
“I am also pleased to welcome Sam Fletcher to Zoopla. She is already very familiar with our business and I look forward to us working closely together. I am privileged to be leading an exceptional and dynamic team and I am hugely excited for what we will achieve together.”
