High Mortgage Rates Make Renting More Affordable Than Owning Homes Across Britain – What To Know

High mortgage rates have made renting more affordable than owning homes across most of Britain.

High Mortgage Rates Make Renting More Affordable than Homeownership Across Britain

Renting has become more affordable than owning homes across almost all of Britain due to high mortgage rates. Analysis by Hamptons shows renting costs £1,337 on average, while typical mortgage payments are £1,637 per month. To balance costs, mortgage rates would need to drop from 6.1% to about 4.2%. Regions like Scotland, the North, Yorkshire, and the Midlands already see a monthly cost difference of £100 to £122 in favor of renting. In London, the gap is significant, with mortgage payments costing tenants an extra £775 monthly or £9,300 annually compared to renting, according to the report of Telegraph.

The mortgage guarantee scheme introduced by the Tories to boost homeownership, has supported about 40,000 buyers since 2021. Despite an extension through June next year and promises by Labour to continue it if elected, high mortgage rates have reduced its effectiveness. In 2023, mortgage guarantees were only 35% of the previous year’s average with completion rates far below those of the Help to Buy scheme.

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(photo: Financial Times)

Rishi Sunak Vows Mortgage Guarantee Scheme Extension Amid Housing Affordability Challenges

Prime Minister Rishi Sunak has pledged to extend the mortgage guarantee scheme for another three years if re-elected, offering first-time buyers of new builds a 20% interest-free government loan for five years. However, with mortgage rates likely to remain high and political uncertainty affecting demand and the affordability of homeownership remains challenging.

The property market has shown mixed signals, with average prices stabilizing in June after hitting record highs in May. Housing costs continue to rise faster than incomes. Homes were priced at 8.3 times buyers’ incomes last year slightly down from 8.5 times in 2022, indicating some easing in affordability pressures.

Overall, renting has become a more viable option for many prospective homeowners, particularly in southern England. As policymakers navigate these challenges and the future of initiatives like the mortgage guarantee scheme will be crucial in determining access to homeownership across the country.

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