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First-time Buyer

First-time homeowners £500 a year better off than renters

Nick Cheek
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Nick Cheek

The monthly cost of owning a home for first-time buyers is £498 less a year than renting, but the price gap is shrinking.

The monthly cost of owning a home for first-time buyers comes to £971, which is £42 (4%) lower a month than renting an equivalent property, according to Halifax’s Owning vs Renting review.

The analysis is based on the cost of a mortgage on a three-bed home compared to renting the same property, with the latter coming in at £1,013 a month.

Halifax said that while this equated to around a £500 annual saving, the price gap had been falling over the past few years.

The price gap between mortgage and renting reached a peak in 2016 at £1,567 annual saving for homeowners, falling gradually until the pandemic when annual savings in 2019 came to £238.

The saving for owners increased in 2020 to £923 and rose to £1,300 in 2021 before falling to current levels.

Scotland has greatest price gap between renters and owners

The biggest gap between owners and renters is found in Scotland, where renters paid an average £918 a month compared to £727 for homeowners.

This is the equivalent to a 21% monthly saving for borrowers.

The South West took second position with the average homeowner paying £1,029, compared to renters who shelled out £1,237. This is a 17% saving for owners.

The North West and Wales both took third place with 16%t monthly savings for borrowers.

The East of England was the only region where it was more expensive to own a property rather than rent, as homeowners pay around £90 a month more on average than those renting.

Average first-time buyer deposit nearly £65,000

The report stated that the average first-time buyer deposit was £64,598, around 23% of UK house prices.

Scotland had the lowest first-time buyer average at £33,288 or 17% of average house prices in the region.

In England, first-time buyer deposits were lowest in the North East at £31,932, 19% of the average property price in the area.

This compares to London where the average first-time buyer deposit was £188,663 or around 32% of average property prices.

Homeownership brings savings

Kim Kinnaird, mortgages director at Halifax, said the report showed that becoming a homeowner could “bring significant savings for people”.

“Nationally, homeowners are almost £500 better off than renters each year. These benefits are felt most keenly in London, where homeowners are saving nearly £3,000 annually compared to those renting similar properties – a significant figure,” she explained.

Kinnaird noted that making the move from renting to home ownership was hard for many people due to difficulties in raising deposit and finding the right property.

“While a predicted fall in house prices this year will be welcome news for those looking to buy their first home, it doesn’t change the fact that getting on the property ladder remains expensive – a problem that is compounded when rents are high, impacting the ability to save,” she added.

Matthew Thompson, head of sales at Chestertons, said: “London’s lettings market is extremely competitive which can drive up rents and make home ownership a financially more appealing option in the long-term. Particularly in the face of inflation, we encounter renters who are reviewing their options and weighing up the pros and cons of renting versus owning.

“The monthly payments on a mortgage tend to be lower than the monthly rent payments of the equivalent property in London. Due to the capital being one of the most challenging markets to buy a property in, we always advise clients to review their situation carefully and ensure that they are ready to make the step on the property ladder. In addition to mortgage payments, we urge to also take into account additional monthly fees that can come with home ownership such as annual service charges.”