The cost for a first-time buyer of owning a home is now around £1,300 a year less expensive than renting, research has found.
The average monthly cost of running a three-bedroom house for someone taking their first step on the property ladder stands at £677, which is £110 lower than the typical monthly rent paid on a similar property, according to Halifax.
Cheap mortgage deals have helped to widen the cost gap between buying and renting a home in recent years. Five years ago, the average cost of owning your first property was around £37 a month more expensive than renting, Halifax said.
Buying has become even cheaper compared with renting over the last year, the research found. A year ago, the cost of owning a first-time buyer home was around £93 a month less expensive than renting.
Halifax said that while the typical monthly cost of buying a home has increased by £25 compared with a year ago, typical rental costs have increased at a faster rate and have lifted by £42 a month to now stand at £787 a month on average.
Regionally, buying is most cost-effective compared with renting in London, Wales and the West Midlands, Halifax said. The East Midlands is the only region where potential first-time buyers will still find it cheaper to rent than to buy, it found.
The research assumed that a first-time buyer had a deposit of around 10%, or £15,748 in cash terms, to put down. When considering buying costs, it took into account factors such as mortgage payments, household maintenance, insurance costs and the income that would be lost through funding a deposit rather than having cash sitting in savings.
The calculations were weighted to take into account average payments on both interest-only and repayment mortgages.
Average rental payments are based on data from Halifax’s sister brand Birmingham Midshires.
The Government’s flagship Help to Buy scheme has helped to improve the availability of low-deposit mortgages. But with speculation mounting over exactly when the Bank of England base rate will start rising from its five-year low of 0.5%, home owners have been warned to think now about how they will cope when the cost of borrowing increases.
Stricter mortgage lending rules came into force at the end of April, which force lenders to carry out stronger checks to make sure borrowers can truly afford their mortgage payments, both now and when interest rates increase.
Craig McKinlay, mortgage director at Halifax, said: “Buying costs have been remarkably stable for much of the past five years, making home ownership a more attractive option.
“With greater availability of mortgages that require smaller deposits, the property ladder has also become even more accessible for those who can’t afford the monthly costs of owning but had previously not been able to save the necessary deposit.”
Housing and Planning Minister Brandon Lewis said the figures confirm that the Government’s approach is working.
He said: ” We’ve cut the deficit to keep interest rates low, built half a million homes and helped thousands of responsible, hard-working people purchase properties with smaller deposits through Help to Buy.”
Here are the average monthly costs for a first-time buyer of buying a home versus renting regionally, according to Halifax, with the average monthly buying costs followed by the average monthly rental costs, and the difference in percentage and cash terms:
:: London, £1,308, £1,390, minus 6%, minus £82
:: Northern Ireland, £411, £426, minus 3%, minus £14
:: Wales, £487, £532, minus 9%, minus £45
:: North, £490, £498, minus 2%, minus £8
:: Scotland, £553, £582, minus 5%, minus £29
:: North West, £539, £549, minus 2%, minus £11
:: Yorkshire and the Humber, £509, £528, minus 4%, minus £19
:: South West, £736, £755, minus 2%, minus £18
:: South East, £925, £926, 0%, minus £2
:: East Midlands, £559, £544, 3%, £15
:: West Midlands, £589, £671, minus 12%, minus £82
:: East Anglia, £681, £672, 1%, £9