Purchasing a home in London has become a daunting challenge, with mortgage costs now almost 50% higher than renting. This steep rise in costs is placing the dream of homeownership further out of reach for many, as the gap between owning and renting widens significantly.

In the heart of London, particularly within its more affluent boroughs, the financial burden of buying a home has surged dramatically. Prospective homeowners in areas such as Kensington & Chelsea, Richmond upon Thames, City of London, and Camden are facing mortgage payments that exceed rent by £1,738 to £2,927 monthly. Overall, mortgage payments in London are about 42% higher than the city’s average rental costs, a stark contrast to the more moderate differences seen in other major UK cities.

A Closer Look at Borough-Specific Data

In Greenwich, known for attracting investors and first-time buyers due to its relatively lower costs, the difference between mortgage and rent is somewhat less severe but still notable, at 34% or £563 more per month for mortgage payments. Meanwhile, in central boroughs, mortgage costs can be as much as 66% or £1,232 higher than renting the same property.

Comparisons with Other Cities

The disparity between owning and renting is not as pronounced outside of London. For example, Manchester, Bristol, Leeds, Liverpool, and Birmingham show differences ranging from 16% to 31% more for mortgages than rent. This makes these cities more appealing to those priced out of the London market.

The Shift Towards Renting

Tim Darwall-Smith, a director at SBA Property Management, highlights the increasing difficulty of entering the London property market. “London’s property market has always been challenging for prospective buyers, however in recent years rising house prices and borrowing costs have pushed homeownership even further out of reach for many people,” he explains. The financial requirements — including deposits, stamp duty, and legal fees — take years of saving, which is compounded by higher ongoing costs of owning compared to other regions.

The trend is reflected in the changing dynamics of the housing market. Over the last three years, there has been a 4% decrease in the proportion of London households owning their home with a mortgage, while the share of privately rented properties has increased by the same margin. This shift is largely driven by the escalating costs and the current economic climate, pushing more residents towards renting as a more viable option.