Savills has warned of a hit to future house price growth as it finds buying a property is now 20 per cent more expensive than renting, according to the FT.
Research from the estate agent found that mortgages were around 25 per cent cheaper than renting once the costs of capital repayments in the first year of a mortgage were taken out.
But renting becomes cheaper once first-year capital repayment is taken into account.
Savills based its research on adding up all the costs of buying a house, including a 20 per cent deposit, legal fees, stamp duty costs and other charges.
Savills director of residential research Lucian Cook says the data shows first-time buyers face an affordability pressure beyond simply saving for a deposit.
He says: “Even though paying off a repayment mortgage adds to your net wealth, it still makes ownership that much more expensive. It affects your monthly outgoings.”
The Savills research also showed a first-time buyer would need a minimum 61 per cent LTV mortgage to bring the monthly cost of a repayment mortgage below that of renting.
The estate agent adds a rise in interest rates would further widen the divide between mortgage and rent payments.
It says a 1 per cent base rate rise would make home ownership 34 per cent more expensive than renting, with this rising to 50 per cent with a 2 per cent increase.