Is it preferable to buy or rent a home?

According to analysis, renting has actually become more affordable in recent years due to higher mortgage rates

Long-term housing costs are thousands of pounds lower for mortgage borrowers than for renters, but research indicates that the ratio of home ownership to renting has shifted recently.

Moneyfactscompare . co . uk's exclusive analysis of mortgage and rental costs for BFIA has shown how many homeowners now pay higher monthly repayments than renters on average.

Even though mortgage rates have decreased recently due to interest rate reductions, homeowners who are in the middle of a fixed rate agreement will not benefit from this.

When it comes to living in a typical UK home over the past 21 years, homeowners are 6,600 better off than renters, according to the study.

However, the balance shifted in 2022 when mortgage rates skyrocketed due to the then-prime minister Liz Truss's mini-budget.

Many homeowners are currently paying more than the average rent because they are still on those high rates.

There is a growing two-tier real estate market, according to Adam French, head of news at Moneyfactscompare . co . uk.

One tier consists of older homeowners who locked in the low rates of the 2010s and have benefited from the stability and growth of home ownership since purchasing as an asset, while another tier is priced out, compelled to rent for longer periods of time, and deprived of the advantages of ownership that build wealth.

So, is it more cost-effective for you to buy or rent a house?

Mortgages versus rent.

First-time buyers find it difficult to decide whether they would be better off renting or moving up the property ladder due to high house prices and constantly rising rents.

Additionally, it increases the strain on the Bank of Mom and Dad, who might need to raise additional funds to assist their children with housing expenses.

According to the Office for National Statistics, Moneyfacts examined the average June home price between 2005 and 2025 and contrasted the average rent with the typical mortgage rate for a 10% deposit.

Although there will undoubtedly be regional variations, the analysis generally indicates that between 2009 and 2021, owning a home with a mortgage was less expensive than rent.

The 2008 financial crisis, which caused interest rates to fall to record lows and remain there for more than ten years, helped buyers from that era.

But after the mini-Budget in 2022, the balance changed and renting instead of buying became hundreds of pounds less expensive each month.

Stamp duty holidays during the pandemic may have contributed to a portion of this increase in home prices.

In June 2025, average rental expenses were also less than those of a mortgage, though the difference has since narrowed to just 72 per month.

"The shifting financial gap between average rent and mortgage payments reveals how a decade of extremely low interest rates, followed by a rapid rise in borrowing costs, reshaped household wealth and widened the generational divide," stated French. The "

He proposed that buyers who made their purchases early in the 2010s, when credit was cheap and wages were rising, benefited from low interest rates and rising property valuesa potent combination for accumulating wealth.

"However, renters saw little benefit," according to French. "Rents rose rapidly to a higher level than typical mortgage repayments throughout the decade, meaning would-be buyers were trapped saving for ever-larger deposits and the affordability gap between renting and buying grew."

"The extended period of low rates effectively embedded this advantage as property wealth became the primary engine of financial security for millions of homeowners," he continued. The "

Is buying or renting preferable?

When choosing between renting and purchasing a property, cost is only one consideration.

While owning a home gives you an asset that usually increases in value and can be more stable because you have control over your own property, renting gives you flexibility.

However, high inflation might make it more difficult to lower interest rates, which would keep mortgage costs high.

French stated: "Average mortgage rates more than tripled after the Bank of England sharply raised rates to combat inflation, and many homeowners' monthly mortgage repayments exceed typical rents."

"House prices have softened as a result of this drastic reduction in the amount that buyers can borrow, but the fundamental dynamic has not changed: the balance between rates and prices may change, but the underlying strain on household budgets will eventually return to a manageable range. A "

For an increasing number of renters, however, who are vying for a limited number of rental properties, little has changed, keeping rents at roughly the same percentage of income.

"Not only is saving for a deposit as difficult as it has ever been, but the immediate financial impact of taking out a mortgage has become even more difficult to justify," stated French. A "

In a high-rate environment, renting can offer flexibility, especially for younger workers, those unsure of where they want to settle, or anyone stretching their finances to the breaking point to buy, according to French, who adds that renting doesn't have to be the bad option that is frequently depicted.

"Renters may find that they can concentrate on saving or investing in other assets that may provide better returns over time if they are not burdened with maintenance expenses or exposed to the risk of declining house prices. A "

View Additional Bank of England Information.