Approximately 40% of homes currently on the market in the UK are now more affordable to buy with a mortgage than to rent, according to new data from Zoopla. This significant shift in housing affordability assumes buyers can provide a 20% deposit and reflects falling borrowing costs that are helping more people access homeownership. The property portal’s latest research highlights how declining mortgage rates are reshaping the buy versus rent calculation across the country.
The proportion of homes cheaper to buy than rent has increased substantially from 25% a year ago. This improvement stems from lower mortgage rates and changes in how lenders assess potential borrowers, with banks now typically stress testing applications at 6.5% compared to 8.5% last year, according to Zoopla.
Mortgage Rates Drop to Four-Year Lows
Mortgage rates for new loans have fallen to their lowest levels in four years, providing crucial support for housing market activity. Two-year and five-year fixed-rate deals are now available below 4% for the first time since 2022. However, industry experts suggest rates are unlikely to decline much further during the remainder of this year.
The relaxed stress testing requirements are allowing more households to qualify for loans large enough to compete with rental costs. Additionally, this change in lending criteria is working alongside favorable rate conditions to expand the pool of potential buyers who can afford homeownership.
Wage Growth Supports Housing Affordability
Beyond falling mortgage rates, improving housing affordability is being underpinned by sustained wage growth across the UK. Average earnings have risen faster than house prices for three consecutive years, according to the report. This trend is gradually repairing the financial damage caused during the period of surging borrowing costs that followed the Bank of England’s interest rate increases.
The combination of wage increases and moderating house price growth has created a more favorable environment for first-time buyers and those looking to move up the property ladder. Meanwhile, this economic backdrop is contributing to stronger market activity compared to recent years.
Regional Variations in Buy Versus Rent Affordability
The shift toward buying being cheaper than renting is most pronounced in northern England and Scotland. More than half of homes for sale are cheaper to buy than rent in the North East and Scotland, followed closely by the North West region. In contrast, London and parts of the Midlands show fewer than 40% of homes meeting this threshold, reflecting higher property prices and stamp duty costs in these areas.
Sales agreed are running at one of the strongest February levels of the past decade, though they remain 3% below the robust start to 2025. February is on track to record the highest number of new property listings for the month in 10 years, leaving 6% more homes on the market than a year ago, the report indicates.
Modest Price Growth Continues
Despite firmer demand, UK house price growth remains modest at 1.3% in the 12 months to January, down from 1.8% a year earlier. Northern Ireland recorded the fastest annual growth at 8%, followed by the North West at 3.3%, Scotland at 2.8%, and the North East at 2.5%.
Among major cities, Liverpool and Glasgow led growth with 4% and 3% rises respectively, while Manchester and Sheffield recorded increases of 2.9% and 2.6%. However, prices fell slightly in London, Southampton, Portsmouth, Cambridge and Bournemouth, with southern England experiencing broadly flat conditions.
Richard Donnell, executive director at Zoopla, said subdued house price inflation represents good news for both buyers and sellers, indicating a more stable market. He noted that increased seller activity demonstrates a strong desire among homeowners to move.
The housing market trajectory for the remainder of the year will likely depend on whether mortgage rates stabilize at current levels and if wage growth continues to outpace house price increases, though authorities have not confirmed specific forecasts for these economic indicators.
