Mortgage cheaper than rent?

[limeandwater]

On this forum and plenty of other social media sites to be fair - there are a number of people who state that a mortgage is often cheaper than the rent.

It's not true is it? In fact it is quite a long way from being true.

Right now my mortgage at £1,300 is less than what my home will rent for (£1800 judging by the recent requested rents on my road for identical homes) but when I remortgage next year i'll probably pay slightly more than what it would rent for.

No. The point is that rents and house values go up over time (on average) but mortgages don't track either of these increases and only, potentially, go up with variable interest rates and do eventually go down (assuming you are paying off the equity).
You say that the portion of a home purchased with a deposit needs to be discounted because otherwise it isn't a fair comparison. It would also be an unfair comparison if you ignored the very different trajectories of the two options you are comparing.

Flat in village near me sold for £48k so mortgage approx £225 a month, it is currently for rent at £650pcm.

Id imagine if you were able to get 100% mortgages then in most areas a mortgage would be more expensive than renting if you base it off the value today, however as time goes on rent increases and mortgages either stay the same or occasionally go up or down a little with interest rate changes but it most cases it doesn't go up anywhere near rental increases and the mortgage would eventually be cheaper than rent and then at some point it would be paid off. Not quite sure of the point you are trying to make

My DB pays almost double in rent to what we pay in mortgage payments. Same area but he does have an extra bedroom.

It's about the same where I live, for a 90% mortgage vs rent. It used to be that a mortgage was cheaper, but rates are higher now. If you've a lot of equity, then obviously mortgage will be a lot cheaper. But there are additional costs to owning a home as well.

If you are looking for a meaningful comparison, you need to compare the amount of interest you pay (the capital repayment is not strictly a cost of buying) versus the rent.

The average rental yields used to be around 5%. Now with interest rates tending to be close or even higher with booking fees, many landlords are finding that they can make better returns elsewhere and are getting out.

Of course if you only have a mortgage for 50% of your home or bought such a long time ago that your mortgage now only reflects a small part of the overall value, it will be much er cheaper than buying the same now at current value with a high loan to value.

It is a perfectly sustainable business model.

Many businesses - and all asset heavy businesses - require substantial initial investment. It would not argued that building planes or launching new drugs is unsustainable because of early funding requirements. Property management is no different.

And property price crashes are an issue only if the landlord needs to sell at a low point in the market. Landlords with multiple properties may exploit market crashes to grow their portfolio.

Running a successful property letting business has to be a long term investment.

It is a lot cheaper than rent when you have paid it off. I know that 25 years sounds like a long time but it does pass

Also your mortgage payments become a smaller portion of your income as you progress through your working life.

i bought my first home around Covid as interest rates were on the rise, I only had a small deposit and my mortgage is around 600 a month rent in the same area for the same type of house is 1100-1200. I’ve remortgaged twice since and even with the rising mortgage rates mortgage has remained the better option

It can be yes. We currently pay less on our mortgage than we used to on rent. And we haven’t rented for over a decade.
That said, we haven’t never ending house costs (planned and unplanned maintenance, etc) that we never had to allow for when renting. And of course we poured in masses of money for deposit and fees etc when we bought.
So if you add on deposits, legal fees, stamp duty, surveys, etc., and then the ost of maintaining and improving a home it is far more expensive to own. BUT you end up with something that is yours. Which I think is absolutely worth it.
But my understanding, own experience and friends, is that generally speaking the monthly cost of renting is more than a mortgage. Which is often one of the reasons so many find it so hard to save for a deposit and costs of buying a house.

My mortgage is £563/month. Next door was rented for £2500/month last year.

I’m in Ireland so I can’t comment on the UK but in major cities here, rent is always more expensive than a mortgage. You can’t discount the deposit as I don’t know any banks here doing 100% mortgages. But for pig irons sake I’ve calculated the repayments on my house with 100% mortgage vs what houses are renting for. My repayment on a new mortgage would be approx €2700 vs rent of €2900. My mortgage is only €800 a month but having bought nearly 20 years ago and paid a big chunk down it’s not comparative

The big problem here is people getting the mortgage in the first place. They need to save a substantial deposit, not feasible a lot of the time if you’re trying to rent as well. And banks (rightly so given the crash in 2007) are strict in lending to FTBs.

We bought our parents house and with a 5% deposit and a 25 year mortgage payments are just under £1300 a month. Rental for the same property is about the same so not much in it. However you are paying the debt off so in 10 years time when you remortgage you should be able to access better rates as there is more equity in the property. Obviously at the end of 25 years the property is yours with no monthly costs.

Our mortgage is £428 a month and rent would be at least £900 a month. We pay less on a large 3 bed Victorian house now, than we did 17 years ago renting a 1 bed flat!

The point being it's not the norm, by far, for rental properties to be making a loss which was the original question being asked.

The vast majority of rental housing stock is on BTL, owned by people who have 1 single additional property to rent out and for whom covering the mortgage is the bare minimum they need to do.

What you are describing is the preserve of large property companies who can cover and are prepared to accept the risks of making a loss on rental income.

Generally mortgage payments are less than renting but so many variables so a daft question really: area of UK, LTV, repayment v interest only, % rate deal - fixed or variable. If you’re a homeowner, factor in buildings insurance, maintenance and repairs. As labour and materials have gone up above inflation in recent years and will likely go up more this year due to the Iran situation, you cannot underestimate how much you may need to pay if say you need a new boiler for example.

Bought my 2nd property in 2025, with a 100% mortgage (actually a bit more as it covered part of some of the fees) not in the UK mind you, but in my case it’s still cheaper than renting. In fact I rent that property out and I pay £500 in mortgage and rent it out for close to £900.

and since I have bought the price of this flat has increased by over 50k (that’s only a little less that half of the price I have bought it for) as the city I have bought it in has become incredibly popular.

My first property I bought outright in 2023 when prices were a lot cheaper so not certain about mortgages but I had had a look back then and I would have had to repay under £350 per month and rent then would have been about £600. Just shy of 3 years later and rent would now be at least £800 a month while the current value of my home has now increased by 100k since 2023.

So I can’t see how renting would be cheaper when most of the people I know here have been pushed out of the city by crazy rent prices and when I could probably buy another place with just the equity gained by both property in under 3 years.

Actually you end up with a house at the start of it.

You own a house. You also owe money to a bank. The loan is secured on the house you own and that limits slightly what you can do with your house. But it's you not the bank who owns it from day 1.

That matters because (upside) you and not the bank get any increase in value. All you ever owe the bank is the original loan plus interest. But also (downside) the taxes and maintenance and any loosing value is also all on you - the bank just want their money back regardless.

There are hundreds of ex-council 3 bedroom semis exactly like mine around here. My memories are a bit fuzzy but I think that when we bought it, a near-identical house could have been rented for about £750pcm and our mortgage was about £550pcm. Nowadays you could buy a pretty much identical house with a mortgage payment of £1,350pcm but renting the same house would be at least £1,700 pcm (from a private landlord - it would be a lot less if rented as social housing). Crucially though, we are still paying not far off £550pcm, and in a few years time it will be fully paid off and it will be zero. Over our ownership we have had to pay out £6k on a new roof and £5k on a new boiler that obviously wouldn't be our problem if we'd rented but if we'd rented our rent would have crept up to keep pace with market rates and we still would have paid a lot more over the years. Although prices can go down as well as up, fluctuations tend to be relatively short term and there is an average trend upwards on the scale of a mortgage loan period even if there's a crash at some point. Even if mortgage and rent are pretty much the same now for a particular house size and location, in 5 years time the rent will have gone up a lot and the mortgage probably not so much

I think there might be a different story in soulless newbuild developments that are sold at inflated prices off-book and are actually not that pleasant to live in so don't command as good a rent. I would also be very cautious about buying any leashold flat, but our experience has definitely been of ownership being cheaper overall.

It a lot of cases it is true. I was renting a building for my business, I bought it in the end as it was cheaper.

If you include costs like maintenance etc that come with a mortgage but not with renting, then yes, renting is often cheaper.

I rent out houses in this area, so I can give a realistic comparison to what’s being said. This is actually a low-cost property for the area, and it’s on a prime rental road—I’ve got properties on this same street.

I bought mine cheaper over time, but if someone was to purchase this one now on a 100% mortgage, assuming a 25-year term, you’re looking at roughly £584 a month at 5% or £644 at 6%.

To rent this house, you’d be paying at least £750. For tenants in this price bracket, that’s a pretty significant saving if they were able to buy instead.

I buy my rentals for investment. This with 25% mortgage in a LTD business and paying equity off for make around 2k a year after costs 5 years in roughly 3k in year 3.

my mortgage on my 4 bed semi is £650pm, rent where I live on a house the same size would be minimum £1,800pm.
however, I’ve had my mortgage for 10yrs now, while a friend has recently bought a 3 bed semi and is paying £1,500pm which is around the same as renting a 3 bed house around our way.

You seem to be saying that some LL will pull out rather than comply with the new rules.

What happens to the houses that LLs stop renting out? Do you think they will just stand empty (LL prefers to make no money at all!) or do you think LLs will sell up?

And if you think they will sell up, who to?