Last updated at 14:53, Friday, 29 June 2012

Buying a house or flat has become cheaper than renting in 84 per cent of Britain’s major towns and cities.

Those renting can end up paying 14 per cent more than mortgage holders for the same size and type of property, according to property website Zoopla. co.uk. The figure is up on the same time last year, when buying was cheaper than renting in 80 per cent of places.

Several factors account for the finding. The low cost of borrowing is one. Bank of England interest rates have been at record low of 0.5 per cent for more than three years and the bank is expected to keep them at that level for the foreseeable future – with some forecasters suggesting they may cut them even further.

Another factor is the continuing drop in house prices, with average prices falling again in June for the 24th month in a row. And a third factor is the ongoing shortage of first-time buyers, which means demand for rental property remains high – so pushing rents upwards.

Cumbria is one of those areas where buying is typically cheaper than renting and Nick Elgey, managing director of Cumberland Estate Agents, believes it is the potential first-time buyer who will be most affected by the news.

He points out that renters can be divorced people, people who are downsizing or those who are in limbo – having sold their house before completing the purchase of a new one – but adds: “They are more generally young people who aren’t yet able to buy.”

The average cost of a house in Cumbria stood at £125,500 in April, but first-timers tend to be looking at terraced houses or flats at around the £70,000 mark. A 90 per cent mortgage over 25 years could work out at about £385 a month, whereas rents for the same property could be £450 or more.

“Clearly it’s cheaper to buy than rent if you are able to buy,” Mr Elgey says. “You may well find an attractive property for rent, but it’s dead money. You are not buying into the property, and paying rent could prevent you saving.”

Nicholas Leeming of Zoopla.co.uk points out the same problem. “Higher rental costs leave less disposable income for renters to save for deposits,” he says.

“The problem will only ease if rental prices fall or mortgage availability improves dramatically – so the ball is firmly in the court of lenders.”

First published at 14:35, Friday, 29 June 2012
Published by http://www.cumberlandnews.co.uk