Tenant demand remains high despite the price of renting
30 January 2012
Written by Jenny Barrett
Buying a home has found to be sixteen per cent cheaper than renting per month, but the number of residential mortgage purchases is still in decline.
Research from Halifax Bank has shown that there were just over half a million house purchases with a mortgage in 2011 – the lowest in more than thirty years.
This has been put down to the high level of deposit required for a mortgage. The size of a deposit required for a mortgage has more than doubled in the last ten years.
“The affordability gains for buyers relative to renters in the last three years have been significant,” said Martin Ellis, a Housing Economist at Halifax.
“The average mortgage payment has fallen dramatically over recent years as a result of falling house prices and mortgage rates. At the same time, rents have risen due to strong demand for rented accommodation,” added Ellis.
The increase in demand is good news for landlords, with the average cost of renting going up by nine per cent since 2009, rising five per cent in the past twelve months alone.
This, combined with the drop in home buying costs of more than a quarter since 2008, has made the monthly cost of mortgage payments more than £100 cheaper than monthly rental prices.
London was found to have the most affordable buying costs in relation to rental prices. It was found that the average borrower in the capital pays 10.2 per cent less per month than the average renter.
But buy to let investors are still in a strong position. Experts have said that tenant demand is still very high, as people are finding it harder and harder to raise the money for a residential mortgage.
“Despite the improvement in the relative affordability of buying a home, the number of purchasers has continued to fall.
“[This is] due to the ongoing challenges in raising a deposit and the considerable uncertainty over the prospects for the UK economy, which have severely constrained housing demand,” added Ellis.
