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London commuting is only worthwhile if you earn less than £20 per hour

Those living 60 minutes outside of London and making the commute to work every day are financially better off when compared to those living much closer to their place of work, according to new research by Lloyds Bank.

The research found that homebuyers willing to commute for an hour save £480,000 on average in the capital. Unsurprisingly, homebuyers can get more for their money outside of central London (zones 1 and 2) due to lower property prices. Commuting for an hour can save homebuyers an average of £480,858 (60%).

However, assuming that the homebuyer is able to borrow enough money to live in the centre of London, the £480,000 extra they pay for their home will cost them around £800 per month on a 2% interest only mortgage. This equates to £200 per week, or £40 per week day. Therefore, the amount of money you will be ‘paid’ to sit on a train for two hours per day is £40, or £20 per hour, which for most buyers in the capital would be around half as much as they earn per hour while at work. For a 2-hour daily commute to be worthwhile, average mortgage rates would need to be in excess of 4%, at the current property price differentials.

However, this is also assuming that only one person in the household is commuting into the capital. If two people from the same household are both commuting daily then it would only be cost effective if mortgage rates were in excess of 8%.

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