Owning a property instead of renting saves £1,098 per year on average, according to new research by property website Zoopla.co.uk.

The average rental payment on a two-bedroom flat across the UK is £8,258 per year, £1,098 less than the cost of servicing a 5% interest-only mortgage on a similar property, which currently stands at £7,160 per year.

The savings to be had from buying instead of renting is equivalent to 4.2% of the average full time salary in the UK (£26,200). Renting is now the cheaper option in only six of the 50 largest towns and cities across the country.

Reading leads the pack in terms of places where buying is most cost-effective, with owners paying 34% less than renters on average. Outside Reading, the North dominates the list of places where it is now materially cheaper to own than rent as rents have climbed more steeply than house prices, with York, Peterborough, Aberdeen and Hull all in the top 5. In fact, only one other location in the South, Milton Keynes, made the top 30 most cost-effective places to buy.

Swansea tops the list of places where renting remains more cost-effective than owning, with renters paying 11% less on average. And, renting in London is now a better option than buying thanks to rapidly increasing house prices in the capital which have climbed 5.9% on average over the past 12 months, with London renters now saving 9.5% per year over buyers. Bournemouth, Bedford and Middlesbrough round out the top 5 places where renting currently rules.

Lawrence Hall of Zoopla.co.uk said: “Despite the improved first-time buyer market over the past year, demand for rental accommodation is still fierce. Thousands of people who want to buy are still being forced into the private rented sector every month, which is pushing rents up. Provided you can get a mortgage, buying is generally the more cost effective option – particularly in the north, where house prices are lower and rising at slower rate than in the south.

“However, if property prices continue to increase quickly the tables may turn and monthly rent payments could become cheaper than the cost of servicing a mortgage. That has already happened in London, where house prices rises have pulled away from the rest of the country and are rising at a faster pace than rental costs, which has now made renting the cheaper option.”