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First-time Buyer

Gap in homeowner and renter costs at widest in five years

Paloma Kubiak
Written By:
Paloma Kubiak

The gap between the cost of a mortgage and renting a home has reached its widest in five years.

Annual home ownership costs were £1,378 cheaper than renting in 2021 compared to £1,369 in 2017, according to the Halifax buying vs renting review.

The gap narrowed in the last three years, reaching a historical low in 2019 when the difference in costs was just £116. 

Halifax based its analysis on the mortgage needed for a three-bed house compared to the average rent of the same property. 

It found that in 2021, monthly rental costs rose 6% annually to £874 while buying costs increased 2% to £759. This represented a monthly difference of £115. 

Halifax suggested that over the term of a 25-year mortgage, this would result in a difference of more than £27,600. 

The biggest differences in homeowner and renter expenses were found in Scotland and the North West, with gaps of 22% apiece. In monetary terms, this represented a variance of £2,081 in the North West and £1,817 in Scotland. 

Although the percentage difference in London was less at 20%, the capital saw homeowners make the most yearly savings of £4,181. 

The smallest gap was found in Northern Ireland, with a 3% disparity representing a £205 annual saving for homeowners. 

Esther Dijkstra, mortgages director at Halifax, said: “Over the last year, we have seen record numbers of buyers entering the market, moving to bigger properties and taking advantage of the stamp duty holiday.    

“However, historic lows for interest rates have kept mortgage costs down, compared to rents. For the second year running, buyers in Scotland see the greatest proportional difference in costs compared to renters and are joined this year by those in the North West of England, where rents are over a fifth more than buying costs.”   

Dijkstra noted that although homeowners saved more than renters once they acquired a property, raising a deposit was still an issue. 

In cost terms, the average deposit rose by 9% to £62,415 in 2021 compared to the previous year. 

Dijkstra added: “Still, before homebuyers can benefit from lower monthly costs, a deposit needs to be put together, still the greatest challenge for many first-time buyers.   

“The £62,000 average deposit we see in our data may be an unimaginable sum to potential first-time buyers, but it’s much higher than many need to get a foot on their housing ladder. Deposits from 5% are available and, based on the average house price, mean putting down a £12,500 deposit – significantly less than the average.”