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Mortgage borrowers are thousands of pounds better off than renters when it comes to housing costs over the long-term but the balance between home ownership and renting has changed in recent years, research suggests. Exclusive analysis of mortgage and rental costs by Moneyfactscompare.co.uk for MoneyWeek has highlighted how many homeowners are now paying higher monthly repayments than renters on average. Mortgage rates may have fallen in recent months amid interest rate cuts but that only helps those getting a mortgage now and not homeowners in the middle of a fixed rate deal. Homeowners are £6,600 better off on average than renters when it comes to living in a typical UK home over the past 21 years, the research found. But the balance changed in 2022 after the mini-Budget under then-prime minister Liz Truss sent mortgage rates soaring. Many homeowners are still on those high rates so are now paying more than the typical average rent. Adam French, head of news at Moneyfactscompare.co.uk, warned there is a growing ‘two-tier’ property market. One tier is a group of older homeowners who locked in the low rates of the 2010s enjoying the stability and growth of home ownership since buying as an asset, and another priced out, forced to rent for longer and missing out on the wealth-building benefits of ownership. So are you financially better-off buying or renting your home? Mortgages vs rent High house prices and ever-rising rising rents have made it hard for first-time buyers to know whether they are better off renting or getting on the property ladder. It is also puts more pressure on the Bank of Mum and Dad, who may have to stump up more cash to help their kids with housing costs. Moneyfacts analysed the average house price each June between 2005 and 2025 and compared the typical mortgage rate for a 10% deposit and the average rent, according to the Office for National Statistics. There will of course be regional differences but on average the analysis shows it was cheaper to own a home with a mortgage than rent between 2009 and 2021. Buyers from that period were helped by the financial crisis of 2008, which saw interest rates drop to record lows and stay at that level for more than a decade. However, the balance shifted in the aftermath of the mini-Budget in 2022 and it became hundreds of pounds cheaper each month to actually rent rather than own. Some of this will have been down to higher house prices, which were boosted by stamp duty holidays during the pandemic. Average rental costs were also cheaper than having a mortgage in June 2025, although the gap has dropped to just £72 per month. French said: “The changing financial gap between average rent and mortgage payments reveals how a decade of ultra-low interest rates, followed by a rapid rise in borrowing costs reshaped household wealth and widened the generational divide.” He suggested buyers who purchased early in the 2010s amid cheap credit and rising wages benefitted from both rising property values and low interest costs, a powerful combination for building wealth. "However, renters saw little benefit," French said, "with rents rising 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". He added: "The long period of low rates effectively embedded this advantage as property wealth became the main engine of financial security for millions of homeowners.” Is it better to rent or buy? Cost is just one factor when deciding between renting and buying a property. Renting gives you flexibility while owning a home gives you an asset that typically rises in value and can be more stable as you are in control of your own property. But high inflation may limit the scope for further interest rate cuts, keeping mortgage costs high. French said: “Many homeowners' monthly mortgage repayments exceed typical rents after average mortgage rates more than tripled following the Bank of England sharply increasing rates to combat inflation. "This has dramatically reduced how much buyers can borrow, and house prices have softened as a result with the key dynamic remaining the same: the balance between rates and prices may shift, but the underlying strain on households’ budgets will eventually return to a tolerable range." Little has changed for a growing number of renters though who are competing for a tighter supply of rental properties which is keeping rents at around the same share of income. French said: "Not only is it as tough as it has ever been to save for a deposit, but now the immediate financial hit of taking out a mortgage has become even harder to justify.” That may leave renting as the only option but French says this doesn’t have to be the poor choice it is often portrayed to be, adding: “In a high-rate environment, renting can offer flexibility, particularly for younger workers, those unsure of where they want to settle, or anyone stretching their finances to breaking point to buy. “Without the burden of maintenance costs or exposure to the risk of falling house prices, renters may find that they can focus on saving or investing in other assets that may offer better returns over time.”
