Thousands of people are spending hundreds of pounds a week renting their homes, when it would be cheaper to buy instead.

The West Midlands has been identified as an area where low property prices make it cost effective to take out a mortgage.

Low interest rates have brought down the cost of mortgages – although the recession has made it more difficult to borrow money from banks and building societies.

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Homes in the West Midlands are available to buy from as little as £50,000, while the cost of renting has increased.

Monthly rents on a two-bedroom flat are now 9.9 per cent higher than interest-only mortgage payments on similar properties, based on an interest rate of five per cent, according to research by a property firm.

The number of locations where buying is cheaper than rent has increased from 74 per cent nationally to 80 per cent in the last five months alone.

Estate agents across the Black Country and Staffordshire say the increase has been triggered by struggling property values and an increase in rent rates as more would-be buyers struggle to fund deposits.

The record low Bank of England base rate, which has led to lower mortgage rates, has also taken its toll and sellers are accepting lower bids in an effort to quicken sales.

Sharon Humphreys, manager at Jayman Independent Estate Agents, in Wolverhampton Road, Cannock, said: “The rental market is booming at the moment, you can’t get a three-bedroom semi for less than £375.

“People are better off buying – if they can afford the deposit.”

Mrs Humphreys said many sellers are accepting 10 per cent below the asking price, adding: “I think prices will continue to fall for a while before settling. It’s a good time to buy.”

The study by property site Zoopla.co.uk says that in Birmingham rents are 36 per cent higher than mortgage payments – and it is around a third cheaper to have a mortgage than pay rent in Walsall.

Cheaper

Chris Edwards, managing partner of Edwards Moore Estate Agency in Darwall Street, Walsall, said: “In some circumstances, it can be cheaper to buy than rent.

“Certainly, in terms of long term, first-time buyers will be paying more in rent that they would do paying off a mortgage each month. But it’s the deposit that they are finding unaffordable.

“At the moment, deposits are at least 10 per cent, and the chances of getting a 95 per cent mortgage being made available is very unlikely.

“If we are not careful, we are going to have a whole generation who will be by-passing buying houses.”

Nick Sanghera, a director at leading letting agent Martin & Co, on Darlington Street, Wolverhampton, warned the state of the market has created a false economy because would-be buyers simply cannot afford the investment.

“It is a buyer’s market, but they can’t get the mortgages no matter how hard they try and people haven’t got the spare capital they need,” he added.

Rob Edwards, proprietor of Bairstow Eves estate agents in Stourbridge, added: “Homes for sale are now cheaper than they were a couple of years ago – and many sellers are prepared to take offers below the asking price.”