Buyers in the UK are better off than renters within five years on average as a result of equity outstripping the value of savings, new research has found.
While home owners with mortgages pay £316 more on average per month compared to those renting equivalent properties, they become better off after a few years, according to the study from property website Zoopla.
The research also shows that the average monthly rental across the UK currently stands at £865 per month versus an average monthly mortgage repayment of £1,181.
But while renters may pay less each month, owners recoup their initial costs and become better off than renters within five years on average as a result of the value of equity outstripping the value of savings. And after seven years, the average owner is £13,850 better off compared to an equivalent tenant.
Aberdeen, Dundee and Glasgow are currently the most cost effective towns for buying versus renting, as the average monthly mortgage repayment is less than the average rent.
At the other end of the scale, Bournemouth, London and Huddersfield are the most cost-effective places for renters due to higher property prices relative to rents for equivalent properties. London owners pay nearly £1,790 more a month than the average renter in the capital.
‘People who invest in property are playing the long game. While buyers have to swallow the initial upfront costs of purchasing a property, they ultimately reap the benefits over renters down the line,’ said Lawrence Hall of Zoopla.
He explained this is due to building up equity in an asset that they will own by the end of the mortgage term. ‘With the strong house price growth we’ve experienced this year and interest rates still low, saving for even a 10% deposit takes its time,’ he added.