23rd August 2014
Getting a expensive deposit together to buy your first home could cost you less in the long run as new figures show renting costs £110 more a month than buying.
Research by Halifax reveals the cost of a first-time buyer owning a home in the UK is now on average £110 cheaper a month than renting – equating to £1,316 a year.
The average monthly mortgage costs associated with owning a three bedroom house for a typical first-time buyer in the UK was £677 a month in June, £110 lower than the typical rent paid on the same property of £787.
Five years ago the cost of buying was £37 more than renting – £734 vs £697 – but since then the tables have turned. The fall in the monthly cost associated with buying compared to renting has been driven by the decline in the average mortgage rate since 2009.
The mortgage rate for a first-time buyer has fallen to an average of 3.09% from 4.92% in June 2009, helping to reduce the average monthly mortgage repayment by £57.
In the past year the difference between renting and owning has risen from £93 to £110 as although the average buying cost has grown £25 a month this has been more than offset by average rental costs increasing by £42.
Craig McKinlay, Halifax mortgage director, said: ‘It is clearly encouraging that since 2009 there has been a significant decline in the cost of buying a home for those trying to get on the housing ladder. The improvement is due to a combination of lower mortgage rates and rising private rents. In contrast, market conditions for renters have deteriorated as rents have risen over the same period.
‘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 afford the monthly costs of owning but had previously not been able to save the necessary deposit.’