Yahoo Finance UK property: Buying almost £1,400 cheaper than renting, says Halifax
People looking for property in the UK could save as much as £1,400 by buying instead of renting, new research has shown.
The latest housing research report from Halifax has revealed that annual home ownership costs were £1,378 ($1,807) cheaper than renting last year, with monthly costs for first-time buyers at £115.
This is 13% lower than the cost of renting an equivalent home, and the difference could add up to more than £27,600 over a 25-year mortgage.
The study was based on housing costs associated with a mortgage on a three-bed home, compared to the average monthly rent of the same property type.
Read more: Rent rise puts pressure on almost 5 million UK families
It comes as monthly rental costs grew by 6% to £874 last year, while buying costs climbed by just 2% to £759. This is a difference of £115, or £1,378 for the full year.
Having narrowed in the last three years, the gap between buying and renting is now at its widest point since 2017. It is more than £1,200 greater than its historical low in 2019, but not as much as the 2015 peak, when annual ownership costs were £1,476 less than those for renting.
The cost gap was greatest in Scotland, for the second consecutive year, and the north west at 22% while the gap between annual rent and ownership in absolute terms was greatest in London, where renting is £4,181 more expensive.
The smallest gap was seen in Northern Ireland, where renting was just £17 per month (3%) higher than ownership.
Read more: UK house prices: Average cost to own a home hits £275,000
“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,” Esther Djikstra, mortgages director at Halifax, said.
“However, historic lows for interest rates have kept mortgage costs down, compared to rents."
She 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.”
Halifax data showed that the average deposit, as a proportion of house price, rose only marginally from 24% in 2020 to 25% in 2021. However, in absolute cost terms it rose £5,334 to £62,415, a growth of 9%.
