19th February 2016
First-time buyers are £865 better off a year owning a home than renting one.
Research by Lloyds shows first-time buyers made an annual average saving of £865 last year compared to those who rent, up from £760 in 2014.
The average monthly cost of buying, including mortgage payments, for a first-time buyer purchasing a three bedroom house was £672 in December 2015, £72 – or 10% – lower than the typical rent of £744 paid on the same property.
The financial gap between buying and renting of £865 is more than double the annual saving of £397 recorded in 2010. This has been due to rising rents in the past five years – the average rent has grown 23% – or £139 a month – from £605, while the average buying cost has grown 17%, or £100 a month form £572.
Buying has been cheaper than renting since 2009, when the average monthly payment was £561 for renting compared with £575 for buying.
However, the South East is one exception to the rule. Average monthly buying costs are £965 in the region, compared to £900 a month average rent.
Buying is most affordable compared to renting in the North West, where a typical first-time buyer pays £133 a month less than an average renter; £525 versus £658.
The number of first-time buyers in the housing market reached 310,000 in 2015, largely unchanged from 2014. However, it represents an increase of almost two-thirds since the number of first-time buyers fell to a recent low of 193,700 in 2011.
First-time buyers accounted for 46% of all house purchases made with a mortgage in 2015, up from 36% since the start of the housing downturn in 2007.
Mike Songer, mortgage director at Lloyds, said: ‘We’ve seen a significant shift over the past five years, with people consistently paying less on average per month when owning their property as opposed to renting. In 2015 this gap widened by over £100 to an annual saving of £865.
‘This has been helped by record low mortgage rates and rising private rents, making owning a home a much more attractive proposition than renting. This steady improvement in the costs of buying compared to renting has helped to boost the number of first-time buyers over the past few years, who now account for 46% of all home sales in 2015 – up from 36% in 2006.
‘Official government schemes, such as Help to Buy have also played a part in helping first-time buyers as have improving economic conditions.’