Renting a home is now cheaper than buying following the Bank of England's interest rate rise, new figures reveal. Until last week it was on average £40 a month cheaper to pay for a mortgage with a 10% deposit than it was to rent the same home. But following the rate rise, Hamptons found that it is now up to £98 a month cheaper to rent than buy. "Rising interest rates are set to swing the scales for would-be first-time buyers. This is a reversal of pre-pandemic times when the average buyer saved nearly £800 a year by owning rather than renting,” said Aneisha Beveridge, head of research at the firm. The research shows that across the country renting has gone from being an average of £40 more expensive a month for those with a 10% deposit to £1 cheaper a month than buying. There are significant regional differences though, with it generally being cheaper to rent than buy further south, while further north it tends to be cheaper to buy than rent. In the east of England it is now £98 a month cheaper to rent than buy while in Scotland it is £176 a month more expensive to rent. For buyers with a 5% deposit, the base rate rise means it will be £105 per month more expensive to buy than rent, up from £59 in May 2022. "Over the next year or so we expect several further small interest rate rises, with mortgage rates set to peak around the middle of 2023, which will add to the cost of buying in cash terms," Ms Beveridge said. "We also expect rental growth to slow later in the year as rising living costs squeeze affordability. By this point it will mean that for new buyers with smaller deposits, the monthly cost of purchasing a home will be significantly higher than renting one."
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