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First-time buyers £27,000 better off than renters

Written by: Tim Chen
Buying a home works out £900 cheaper per year than renting and saves first-time buyers £27,000 over a mortgage term, according to Halifax data.

In December 2017, the average cost of buying a three-bed home was £679 a month, compared to average monthly rent of £754 for the same property type.

This means the gap between buying and renting a three-bed home in the UK has increased 44% since 2016 and is the biggest in four years.

According to the latest Halifax Buying vs. Renting Review, the difference has jumped from £623 to £900 a year.

This means that first-time buyers (FTBs)  would be saving £27,000 over a 30-year mortgage term against renters, though the savings are still smaller than the average deposit of £31,751.

Indeed, since 2008, the average monthly cost of buying has dropped 22%, or £192, against rental payments which have increased by 22%, or £138.

Russell Galley, managing director of Halifax, said: “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.

“Meanwhile, the cost of rent, household maintenance and average deposits have remained broadly flat.”

Nationwide gap

The review also found that buying is consistently cheaper than renting cross the UK, with the greatest annual saving found in London at £2,191, and the smallest in Yorkshire and the Humber at £589 a year.

However, in percentage terms, Scotland and the South West of England represent the biggest savings, where the cost of buying is 17% lower than renting.

The smallest percentage gain is in the South East of England, with the cost of buying 8% lower than renting.

Galley said: “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.”

FTB numbers fell from a high of 359,000 in 2007 to a record low of 192,300 in 2008, according to UK Finance data.

However, FTB levels jumped back to the pre-crisis peak in 2017 to 365,000 – exceeding 300,000 for the fourth consecutive year.

“Despite having to put a sizeable deposit up front, overall homeowners are better off than renters in all parts of the UK. But those who are unable to get on to the property ladder because they can’t raise enough cash are paying more by renting,” Galley added.

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