Cheaper to own than rent as tenants hit with 18% rise in cost in the past four years

16th March 2014

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UK tenants are being hit with accelerating costs as the price of owning a home is now typically £124 per month cheaper than renting according to research from Halifax writes Philip Scott.

The lender’s study found that rents have risen 18% over the past four years, representing the largest cash difference since 2009, when the difference stood at just £6 and average monthly costs for owning and renting were £646 and £652 respectively.

The gap between the costs of owning and renting is being driven by average monthly rents increasing by over £100 since 2009, while average monthly ownership costs have remained relatively unchanged over the same period.

Today’s picture is in stark contrast to the situation for renters five years ago when, in 2008, the monthly ownership cost was on average £226, or 31%, higher than rental costs.

Commenting on the research, Craig McKinlay, mortgage director at Halifax says:There has been a substantial improvement in the affordability of owning compared to renting in recent years, which has been driven by the fact that monthly home ownership costs have fallen by a third, or 32%, since 2008.

“Buying will continue to be a more financially attractive option as the cost of owning a home remains stable. 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.”

Regional variations

Owning a home is most affordable compared to renting in London with the typical homebuyer paying £188 a month less than the average renter, at £1,196 against £1,384. On the other hand, in West Midlands and East Anglia the difference is marginal, with average monthly buying costs just £6 lower than average monthly rental costs, at £553 against £559 and £633 against £640 respectively. However, the level of deposit required by buyers varies significantly across regions, particularly for first time buyers in London, which is also likely to influence whether then can afford to buy.

UK average monthly buying costs and rental payments

Average monthly buying costs Averagemonthlyrental costs* % difference £ difference
Dec-08 £945 £719 31% £226
Dec-09 £646 £652 -1% -£6
Dec-10 £643 £680 -6% -£38
Dec-11 £614 £713 -14% -£99
Dec-12 £621 £741 -16% -£120
Dec-13 £645 £769 -16% -£124

Sources: Halifax, BM Solutions and ONS

*Weighted average of regional data using housing tenure figures.

 

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