Buyers are better off than renters within five years, says new report

Homeowners with mortgages pay £316 more on average every month compared to those renting similar properties, according to Zoopla.

It puts the average monthly rental in the UK at £865 per month against an average monthly mortgage repayment of £1,181.

Zoopla's data indicates that while renters may pay less each month, owners recover their initial costs and become better off within five years on average thanks to the value of equity outstripping the value of savings. After seven years, the average owner is £13,850 richer compared to an equivalent tenant.

Aberdeen, Dundee and Glasgow are named as the most cost-effective towns for buying rather than renting, while Bournemouth, London and Huddersfield are better for renters. London owners pay around £1,790 more a month than the average renter in the capital.

"People who invest in property are playing the long game," said Lawrence Hall of Zoopla. "While buyers have to swallow the initial upfront costs of purchasing a property, they ultimately reap the benefits over renters down the line from building up equity in an asset that they will own by the end of the mortgage term. With the strong house price growth we’ve experienced this year and interest rates still low, saving for even a 10% deposit takes its time."

A separate report from the Joseph Rowntree Foundation suggests that rapidly rising rent levels could leave nearly six million private renters living in poverty by 2040.

It concludes that by 2040:

* People who rent will be more than twice as likely to be living in poverty than homeowners.

* Private rents will rise by 90 per cent, twice as fast as incomes

* One in five people will be living in private rented homes and half of these will be in poverty

Julia Unwin, Chief Executive at JRF, said: "These stark findings are a wake-up call for political leaders. After decades of failing to build enough, those in power have a responsibility to act now to build more genuinely affordable homes. Without that we are storing up trouble for the future, a price that will be paid by children starting school life this year. These high costs are bad for families, the economy and Government.

"We need a clear strategy that builds the homes we need in the right places and avoids locking low income households out of affordable homes. This is about more than frustrated aspirations of home ownership from Generation Rent: the reality facing many people is a life below the poverty line because of the extortionate cost of keeping a roof over your head. Addressing the rising cost of housing is crucial to tackling the high levels of poverty in the UK."