Buying is £900 a year cheaper than renting in the UK, new analysis shows
Buying a home is £900 a year cheaper than renting in the UK which means that a first time buyer can save £27,000 over the typical mortgage term, new research has found.
The average cost including mortgage payments of buying a typical three bedroom home was £679 a month in December 2017, compared to the average monthly rent of £754 for the same property type.
This means that the gap between buying and renting has increased 44% from £623 last year to reach its highest level for four years, according to the analysis from lender the Halifax.
Buying is consistently more financially attractive than renting across the UK, with the greatest annual saving in London at £2,191 and the smallest saving in Yorkshire and the Humber at £589.
However, as a percentage, the biggest savings are made in Scotland and the South West of England, where the cost of buying is 17% lower than renting. The financial gain is most humble in the South East of England, where the cost of buying is 8% lower than renting.
Overall, the average monthly cost of buying has dropped 22% or £192 since 2008, while rental payments have jumped by the same amount at 22% or £138.
‘The gap between buying and renting has widened significantly, primarily driven by a reduction in mortgage rates and a more competitive market pushing down monthly payments,’ said Russell Galley, Halifax managing director.
‘Meanwhile, the cost of rent, household maintenance and average deposits have remained broadly flat. Despite having to put down a sizeable deposit up front, home owners are overall better off than renters in all parts of the UK,’ he pointed out.
But those who are unable to get onto the property ladder because they can’t raise enough cash are paying more by renting. The good news is that record numbers of first time buyers are still taking their first step on to the ladder and helping to bridge this gap thanks to a continued low rate environment and government schemes including Help to Buy,’ he added.
The number of first time buyers fell from a high of 359,900 in 2007 to an all-time low of 192,300 in 2008, according to the Council of Mortgage Lenders, now UK Finance. The levels are back to the pre-crisis peak, having reached 365,000 in 2017 and exceeding 300,000 for the fourth consecutive year.
The review highlights the struggles many young renters face when trying to save up for a house deposit, according to Jeremy Duncombe, director of the Legal & General Mortgage Club.
‘Home ownership is still an aspiration for many and this is understandable when the average saving is £900 a year. Home owners who are fortunate enough to already be on the property ladder are gathering equity to help clear off their debts and this is something which is just not possible while renting,’ he said.