It has become cheaper to rent a home in Britain than to buy, following a sharp rise in mortgage rates since the war in Iran, new figures show.
The cost of a typical new mortgage payment has overtaken the average rent for the first time since June last year, according to analysis by Rightmove.
It found the average advertised monthly rent across Britain is currently £1,547.
This was £123 lower than the average new monthly mortgage payment of £1,670.
Rightmove’s mortgage figure is based on the current average asking price for a home of £373,971 and the average two-year fixed rate in April so far. It also assumes a buyer has a 20% deposit and a 30-year term to pay off their mortgage.
The shift has been driven by borrowing costs moving higher since the beginning of March, when conflict escalated in the Middle East.
This led to swap rates, which are used by lenders to price mortgages, to rise amid volatility in the financial markets, prompting lenders to pull a swathe of mortgage deals from the market.
As a result, the average two-year fixed mortgage rate has increased from 4.24% in February to 5.35% in April, Rightmove said.
However, a wave of banks and building societies have been cutting their rates in the past few days in a sign of more positive sentiment entering the market.
Colleen Babcock, Rightmove’s property expert, said: “Mortgage payments have risen quite sharply in a short space of time for new buyers.
“It will be interesting to see whether more would‑be buyers turn to renting temporarily while rates remain high, particularly when monthly costs can exceed average rents and the timing of rate cuts is still unclear.”
Rightmove’s analysis shows that while renting is cheaper than a mortgage on average across Britain, this is not the case for Scotland and the North East, where it remains cheaper to buy.
The gap between rents and mortgage payments also varies significantly in different regions of Britain.
In the South East, the average monthly rent is £304 less than the average mortgage payment. This rises to £362 in London.
In comparison, in the North West it is £7 cheaper to rent than buy, according to the analysis.
Furthermore, factors such as buying a home with a larger deposit, borrowing less from the bank or spreading payments over a longer period can all lower monthly mortgage costs on an individual basis.
Nathan Emerson, chief executive of Propertymark, said: “This shift highlights the wider economic pressures facing consumers, where affordability challenges are being felt across both renting and buying.
“While renting may appear comparatively cheaper in the short term, it does not necessarily mean it is more affordable overall, particularly as tenants continue to manage the cost of living and limited housing supply.”
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