Owning a home costs nearly £1,400 less a year than renting

Owning a home costs nearly £1,400 less a year than renting
The gap between the cost of owning a home and renting a property is at its widest since 2017, with the costs of owning a home £1,378 cheaper than renting in 2021.

Monthly housing costs for first time buyers are now £115 lower than the cost of renting an equivalent home, according to Halifax’s Buying vs Renting Review. The review is based on the housing costs associated with a mortgage on a three-bedroom property, compared to the average monthly rent for the same property type.

The Bank said that monthly rental costs grew by 6% last year to £874, whilst buying costs rose by 2% to £759.

Regional differences

The biggest gap between annual rent and home ownership in absolute terms was in London. Average monthly rental costs in the capital stood at £1,703 in 2021, compared to monthly home ownership costs of £1,355, a monthly difference of £348, or £4,181 over the year.

The biggest differences proportionately were in Scotland and the North West at 22%, whilst the smallest gap was in Northern Ireland, where rental costs are just £17 a month higher than home ownership costs at £493 a month compared to £476.

Esther Djikstra, 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.”

Deposits remain the biggest challenge for first-time buyers

The average deposit rose from 24% in 2020 to 25% in 2021 – representing an increase in actual cost to £62,000 - according to Halifax, a huge sum for first time buyers to pull together. However, 95% loan to value mortgage deals make it possible for homebuyers to purchase a home with just a 5% deposit, which based on the average property price would equate to a £12,500 deposit.

The biggest deposits are put down by buyers in London. The average property price in the capital was £521,010 in 2021, with buyers putting down an average £173,021 as a deposit, equivalent to 33% of the property value. In contrast, the average deposit put down in Northern Ireland was £34,062, equivalent to 23% of the typical £147,549 property value.

Find out more about saving for a deposit in our guide First Time Buyers - What You Should Know About Saving for a Deposit.

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