Buying is Cheaper than Renting !

A fall in mortgage rates during the last three years means that an average three bedroom property costs £608 a month in mortgage payments compared to £709 in rent.

It is a sharp turnaround compared to three years ago at the height of the credit crisis when higher mortgage rates meant it was more expensive to buy.

In March 2008, it cost £1,060 to buy the property compared to £761 to rent it, according to the research by Halifax, Britain’s biggest mortgage lender.

Back then, average mortgages rates were 5.82 per cent compared to 3.59 per cent today, it revealed.

Suren Thiru, housing economist at Halifax, said: “Such a marked decline in mortgage costs has improved affordability for those able to enter the market as well as helping to ease the pressure on existing home owners’ disposable income.

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“Although the current trade-off between buying and renting is expected to narrow when interest rates start to rise again, the long-term benefits associated with investing in bricks and mortar are likely to ensure that buying will continue to be viewed favourably by many.”

However, banks continue to tighten their lending criteria and demand significant deposits amid fears that home owners will default on their loans due to higher unemployment.

Earlier this month, Halifax announced the end of interest-only mortgages for borrowers who do not provide documentary evidence of how their loan will be repaid. Previously, borrowers only had to explain verbally what repayment vehicle they had in place before receiving a mortgage offer.

Other lenders have also tightened their policies on interest-only mortgages this year, with RBS and Coventry Building Society no longer offering this type of deal to first-time buyers.