First-time buyers now much better-off getting on the housing ladder than renting

16th February 2015


Home buying costs are now significantly lower than average rental costs, providing first-time buyers with a potentially large financial saving provided they can get on the housing ladder.

In fact first-time buyers are £742, or almost 10%, a year better off compared to those who rent, according to research by Halifax.

The lender’s analysis found that the typical monthly buying cost associated with a first-time buyer purchasing a three bedroom house stood at £6,58 in December 2014; £62, or 9%, lower than the typical monthly rent of £720 paid on the same property type.


With the price of a typical first-time buyer home rising by 8% in 2014, the difference has narrowed from £80, or some 12%, to £62 since 2013 as the average monthly buying costs grew by £46 while average monthly rents increased by £28.

However, at the same time, the number of first-time buyers increased by an estimated 22% in 2014, with 326,500 first-time buyers getting on the ladder – the highest annual total since 2007, which reached 359,900.

Buying more affordable than renting in all regions

In 2014, first-time buyers in London have, in cash terms, experienced the largest benefit from buying rather than renting a home. The average monthly cost of £1,275 for those who have bought compares to an average monthly rental price of £1,387, marking a saving of 8% or £112 a month or £1,338 over the year.

The second largest difference is found in the North West where first-time buyers were paying 17% less a month at £109 a month or £1,304 annually, than the typical private tenant in the region.

The smallest differences between the monthly cost of buying and renting are in the East Midlands at £6 or 1% and the South East, at £15 or 2%.

Gap between cost of buying and renting still substantially higher than in 2009

Five years ago the average monthly cost of buying was £15 higher than the typical rent paid at £576 versus £561. Since 2009 the substantial improvement in the affordability of buying relative to renting largely reflects a 28%, or £159 rise in average monthly rental costs over the past five years. This increase was twice as fast as the 14%, at £83 rise in average monthly buying costs.

Craig McKinlay, mortgage director at Halifax said: “While the timescales associated with raising a sufficient deposit to buy a home present a hurdle to many potential first-time buyers, the significant difference in costs between buying and renting, combined with still low mortgage rates, increased consumer confidence and the Help to Buy scheme, have all been factors driving the substantial rise in first-time buyers over the past two years.”


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