Research conducted by mortgage advisors has revealed where renters will need to budget the largest amount for a mortgage on top of rent and how this amount changes with different deposit ratios.
RM Mortgage Solutions analysed the monthly mortgage repayments for properties across the UK and found the median monthly rent in each area. The findings highlight the change in additional costs when comparing different loan to value ratios.
In some areas of the UK, property prices (and monthly mortgage repayments) have risen far above the average rental costs. Keep these cost differences in mind when calculating expenditure after purchasing a property.
The five areas where a 90 per cent LTV mortgage has the largest impact on expenditure versus rent are:
- London +141.3 per cent
- Cambridge +137 per cent
- Winchester +112 per cent
- Stratford-on-Avon +99.9 per cent
- Chichester +98.2 per cent
London is the priciest area for renting in the UK, with rent averaging £1,430 per month across all Boroughs.
People looking to purchase a property in the capital will also see the largest increase in this monthly expenditure. On average, homebuyers face an increase of 141.3 per cent in rental costs with a 10 per cent deposit or an increase of £2,020 per month.
The second area where mortgage repayments increase monthly expenditure the most is Cambridge. The average mortgage repayment for a 10 per cent deposit is an increase of 137 per cent above median rental costs of £895.
Winchester, a highly desirable cathedral city in Hampshire, places third. Rent costs an average of £975 per month, but 90 per cent of LTV mortgage repayments increase this figure by 112 per cent.
Stratford-on-Avon has the lowest average rent of the top five, at £775 per month. However, home buyers will see an average increase of 99.9 per cent in expenditure when purchasing here.
Rounding off the top five areas where a mortgage increases monthly expenditure the most is Chichester. Located on the South coast, this historic city costs £900 per month for median rent.
However, a mortgage increases this expense by 98.2 per cent when soon-to-be homeowners purchase here, with a 10 per cent deposit. Reasons for the increase in additional costs when purchasing here could be due to the large number of vacant second homes in the city, which inflate the property market but don’t affect demand in the area for renting.
In some areas of the UK, a mortgage can make a minimal change to the monthly expenditure that you’d expect when renting. The five most affordable areas to purchase a property are:
- Blackpool -1.7 per cent
- Burnley +0.3 per cent
- Gloucester +6.6 per cent
- Preston +9.3 per cent
- Newcastle upon Tyne +9.6 per cent
Residents in Blackpool are the only Brits who can purchase a property with a 10 per cent deposit and see mortgage repayments 1.7 per cent lower than the average rent for the area.
Richard Moring, Director at RM Mortgage Solutions Ltd, has this to say: “Getting on the property ladder is a major step for anyone. But when doing so, be aware of the change in expenses that you may see. Often mortgages are more than the rent you’re currently paying, and you should budget for this and also save up a safety net for any additional maintenance work that may be required to your property. 5 per cent or 10 per cent deposits are fantastic for getting buyers out of rental properties and into their own homes. But just be aware that a small change in the deposit can massively alter your monthly repayments. If you can, put more into your deposit, or to reduce monthly expenditure, choose a mortgage product with low or no repayment fees so that you can clear your mortgage more quickly.”