Rising rents and falling mortgage payments require lenders to reconsider affordability

Experian research reveals rental payments are catching up with and even surpassing typical mortgage payments for first-time buyers

UK, 7 November 2016: Lenders are being encouraged to recognise rental payments when making lending decisions, as new research unveils that rental rates are rising rapidly when typical monthly mortgage payments for first-time buyers are falling. 

Experian’s ‘First-Time Buyers Index’ has revealed that private tenants paid more for their accommodation in 57% (217) of districts during the third quarter of this year, compared to the same period in 2015. 

At the same time, the monthly mortgage payments a first-time buyer could expect to pay has dropped in 65% (248) of districts, assuming their loan was for 90% of the property on a two-year fixed rate mortgage over 25 years. 

The amount renters pay for their accommodation is either above or within 10% of the monthly payments they could expect to pay for a mortgage in 27% of UK districts (103). This suggests that, if they could raise a deposit, many of the UK’s 4.3 million private renters would find monthly mortgage payments to be manageable and in line with their current rental commitments. 

Scotland is home to six of the 10 districts where rental rates exceed monthly mortgage payments by the greatest margin. Manchester, Salford and Hull in the North of England also offer among the most favourable conditions for renters to become first-time buyers. 

Experian’s Jonathan Westley said: “What our research shows is that while a mortgage is a major on-going commitment, renters often have a track record of making monthly payments which are often similar to what they might pay on a mortgage. 

“Lenders already apply rigorous checks to assess whether mortgage payments will be affordable for would-be homeowners, following the Mortgage Market Review. However, by taking rental payments into account, lenders can get a more complete picture of a borrower’s financial track record and make more suitable lending decisions.” 

The research also found that in 137 (36%) districts the cost of renting had increased in the third quarter year-on-year, while mortgage payments had fallen. The reverse was true in only 16 (4%) places, suggesting the balance across the country is shifting towards mortgage payments becoming more affordable compared to those who are currently renting. 

“Lenders take more into account than simply the amount you have raised for a deposit and what multiple of your earnings you are looking to borrow,” added Westley. 

“The responsibility of ensuring mortgage payments are affordable for borrowers in the long-term is one lenders take seriously. They want to get a complete picture of a would-be homeowner’s financial commitments and see a strong track record of making regular payments. This helps lenders to understand how a borrower would manage mortgage payments now and in the future.” 

Experian has developed the Rental Exchange to help renters get a mortgage. It allows rental payment information to be submitted to Experian, which will help strengthen renters’ credit histories and ease their difficulties when they buy a home. 

Tenants can sign up to the Rental Exchange through a joint initiative with Credit Ladder. More than one million social housing tenants are also in line to benefit from the scheme, with about 90 housing associations are participating. A stronger credit history can also help renters to access finance or prove their identity online. 

For further information about the Rental Exchange or to get involved, please visit experian.co.uk/rental-exchange


Table 1: Rent and mortgage payment comparisons in UK for Q3 2016




Number of districts

% of districts

Cheaper to rent than buy



Cheaper to buy than rent



Rental payments - increased



Rental payments - decreased



Rental payments - no change



Mortgage payments - increased



Mortgage payments - decreased



Mortgage payments - no change



Rent & Mortgage - Both Increased



Rent & Mortgage - Both Decreased



Rent Increased, Mortgage Decreased



Mortgage Increased, Rent Decreased




Table 2: Top 10 districts where rental payments exceed mortgage payments by % difference


£s Difference rental v mortgage payments

% Difference rental v mortgage payments

Median Rental Payment

Median Mortgage Payment






Glasgow City





North Ayrshire





Merthyr Tydfil





North Lanarkshire





West Dunbartonshire





Dundee City



























Note to editors

For the purposes of this research, it is assumed that a first-time buyer would take a two-year fixed rate mortgage with a 90% loan-to-value ratio over 25 years. Mortgage rates are taken from the Bank of England at the end of each quarter.

Jonathan Westley is Managing Director of Consumer Information Services at Experian.



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