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Cost gap between buying and renting widens

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First time buyers spend an average of £110 per month – and about £1,300 per year – less than their renting counterparts.

In the past year the cost difference associated with owning a three bedroom house for a typical first time buyer versus renting a similar property has increased by £17, driven at least in part by a fall in the average mortgage rate. The average rate for a first time buyer has fallen to 3.09 per cent from 4.92 per cent in June 2009.

Craig McKinlay, mortgage director at Halifax, 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 rent. In contrast, market conditions for renters have deteriorated as rents have risen over the same period.”

Only in the East Midlands are first time buyers worse-off than renters; in all other regions of the UK buying is more cost-effective. In the West Midlands, for example, a first time buyer pays 12 per cent less per month than the typical private tenant.

First time buyers now account for 45 per cent of all home purchases, up from 38 per cent in 2009.

McKinaly concluded: “Buying costs have been remarkably stable for much of the past five years, making homeownership 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.”

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