Buying vs Renting: London’s mortgage expenses have soared to 42% above the average rental rates in the city, considerably complicating the home-buying process.
In London’s wealthier central areas, homebuyers are finding themselves paying about 66% or £1,232 more each month on mortgages compared to renting.
However, in Greenwich, a favourite spot for investors and those purchasing their first homes, the difference is somewhat less steep, with mortgages costing 34% or £563 more monthly than rent.
Tim Darwall-Smith, director of SBA Property Management, expressed that while the London property market has always posed difficulties to buyers, the recent surge in property prices and borrowing expenses has made the dream of homeownership even more elusive.
He highlighted that saving for a deposit in London, along with covering extra costs like stamp duty and legal fees, is a long-term endeavour. Despite having a deposit, purchasing in London is significantly costlier than in other parts of the UK.
As the cost to own continues to escalate, potential buyers are increasingly opting to rent or are looking to buy in more budget-friendly cities.
In comparison to Londoners, who pay 42% more for mortgages over rent, Manchester residents face a smaller increase of 16% in monthly mortgage costs. Bristol sees an 18% higher mortgage rate compared to rental costs.
Other cities such as Leeds, Liverpool, and Birmingham have mortgage costs that are around 21%, 29%, and 31% higher than renting, respectively.
Over the last three years, the number of homeowners with mortgages in London has dropped by 4%.
Concurrently, there’s been a corresponding increase in privately rented homes in London.
Owing to the steep financial barriers to owning a home, intensified by the broader cost-of-living crisis, for many Londoners, renting remains the only viable path until they can save enough for a deposit and afford the monthly mortgage expenditures.
Again, the example of Greenwich is cited, where mortgage costs are relatively more affordable, being 34% or £563 more per month than rent.
The areas where mortgage costs have surged the most, outpacing rents significantly, include Kensington & Chelsea, Richmond upon Thames, City of London, and Camden.
In these boroughs, the monthly mortgage payments are a staggering £1,738 to £2,927 more than the average rent.