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First-time Buyer

Buyers almost 10 per cent better off than renters

Kit Klarenberg
Written By:
Kit Klarenberg

First-time buyers in the UK are £742 a year better off with their own home compared to those who rent, according to research issued today by Halifax.

The average monthly buying cost associated with a first-time buyer purchasing a three bedroom house stood at £6582 in December 2014; £62 (9 per cent) lower than the typical monthly rent of £7203 paid on the same property type.

With the price of a typical first-time buyer home rising by 8 per cent in 2014, the difference has narrowed from £80 (12 per cent) to £62 since 2013 as the average monthly buying costs grew by £46, while average monthly rents increased by £28. However, at the same time, the number of first-time buyers increased by an estimated 22 per cent in 2014, with 326,500 first-time buyers getting on the ladder – the highest annual total since 2007 (359,900).

In 2014, first-time buyers in London have, in cash terms, experienced the largest benefit from buying rather than renting a home. The average monthly cost of £1,275 for those who have bought compares to an average monthly rental price of £1,387; a saving of £112 a month (£1,338 over the year) or 8 per cent.

The second largest difference is found in the North West, where first-time buyers were paying 17 per cent less a month (£109 a month or £1,304 annually) than the typical private tenant in the region.

The smallest differences between the monthly cost of buying and renting are in the East Midlands (£6 or 1 per cent) and the South East (£15 or 2 per cent).

Five years ago the average monthly cost of buying was £15 higher than the typical rent paid (£576 versus £561). Since 2009 the substantial improvement in the affordability of buying relative to renting largely reflects a 28 per cent (£159) rise in average monthly rental costs over the past five years. This increase was twice as fast as the 14 per cent (or £83) rise in average monthly buying costs.

“Average home buying costs are significantly lower than average rental costs, providing first-time buyers with a large financial saving if they can get on the housing ladder,” Craig McKinlay, mortgage director at Halifax said. “While raising a sufficient deposit to buy a home presents a hurdle to many potential first-time buyers, the significant difference in costs between buying and renting, combined with still low mortgage rates, increased consumer confidence and the Help to Buy scheme, have all been factors driving the substantial rise in first-time buyers over the past two years.”