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Home Property

Mortgages now ‘more expensive’ than renting – research shows

The new benchmark has been described as a “historical pinch point” that will likely lead to falling house prices.

Jack Peat by Jack Peat
2022-10-11 08:09
in Property
Credit;PA

Credit;PA

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The cost of paying a mortgage is now no longer cheaper than renting, according to research by UBS Group AG.

Soaring interest rates have pushed repayments past 40 per cent of a homeowner’s average income – significantly more than where it was at the end of 2021.

Average monthly mortgage payments were £800 in December last year. Today they are in excess of £1,100 per month.

The 40 per cent benchmark is a “historical pinch point” that is a key indicator for house price falls, UBS analysts Gregor Kuglitsch and Marcus Cole said.

“Affordability is likely to deteriorate further,” they added.

Paying a mortgage in Britain is no longer cheaper than renting.

Mortgage payments are set to eat up more than 40% of income. pic.twitter.com/t4KCUaUXYE

— Best for Britain (@BestForBritain) October 10, 2022

UBS warned that house prices will slump by 10 per cent across 2023 as soaring interest rates make home moves unaffordable. Property sales will plunge by a fifth.

The bank joined a growing group of analysts and economists that have forecast a major housing downturn.

Investment bank Credit Suisse has said house prices could fall by 10 per cent to 15 per cent, consultancy Capital Economics expects a 12 per cent drop over two years, Oxford Economics has forecast a 13 per cent fall by the end of 2024, while Knight Frank estate agents expects a 10 per cent fall.

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