The gap between rental and mortgage costs has been squeezed as in May, it was £40 per month cheaper to service a mortgage with a 10% deposit than it was to rent the same home. In November last year, it would have been £160 cheaper. 

However, analysis by Hamptons revealed that if the 0.25% increase to the base rate is passed onto mortgage costs, renting a home will be £1 cheaper than the monthly costs associated with buying.  

Hamptons calculated that for someone with a 10% deposit, the rate rise will add £41 to their average monthly mortgage repayment, taking it from £1,112 to £1,153. 

By contrast in May, the average rent rose to £1,152. 

This differs regionally as Hamptons’ analysis found it was typically cheaper to rent than buy in the South, while this was the opposite in the North. 

In the South East, it is £1 cheaper per month to buy while in the South West it is £2 cheaper. In the East of England, it is £64 cheaper per month to rent than buy, while in the East Midlands it is £44 cheaper. 

Aneisha Beveridge, head of research at Hamptons, said: “Rising interest rates are set to swing the scales for would-be first-time buyers. For the last 11 months it’s been cheaper to buy with a 10% deposit than rent due to rental growth running hot and mortgage rates near record lows.   

“But the Bank of England base rate hike will change this once again, pushing the cost of buying back above renting – a reversal of pre-pandemic times when the average buyer saved nearly £800 a year by owning rather than renting.”  

She added: “For many buyers though, it isn’t just the challenge of servicing higher monthly mortgage repayments, it’s saving up for a deposit which remains the big barrier. 

“Over the next year or so we expect several further small interest rate rises, with mortgage rates set to peak around the middle of 2023 which will add to the cost of buying in cash terms. We also expect rental growth to slow later in the year as rising living costs squeeze affordability. By this point it will mean that for new buyers with smaller deposits, the monthly cost of purchasing a home will be significantly higher than renting one.”