Buying almost £1,400 cheaper a year than renting | moneyfacts.co.uk

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Michael Brown

Content Writer
Published: 21/03/2022

Homeowners will save £115 a month and £27,600 over a 25-year period compared to their renting counterparts in 2021, says Halifax.

Renting rather than owning a home will now cost you £1,378 more per year, according to Halifax.

Last year, monthly rental costs grew by 6%, from £821 to £874 while buying costs were less volatile at a 2% growth, from £745 to £759.

“Historic lows for interest rates have kept mortgage costs down, compared to rents,” explained Esther Djikstra, Mortgages Director at Halifax.

This, coupled with other benefits, resulted in a record number of buyers, she 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,” said Djikstra.

This difference comes at a time when the gap between owning and renting had been narrowing over the past three years, with 2019 recording an annual saving of £116 for homeowners. Instead, the latest findings from the Halifax Buying vs Renting Review means the gap is now at the widest since 2017.

First-time buyer worries

For first-time buyers, raising a deposit is a great barrier to move from renting to owning a home and therefore benefiting from these savings.  

While Halifax suggested the average deposit for mortgages now stands at £62,000, it is much higher than what first-time buyers typically need to obtain a mortgage, said Djikstra.

“Deposits from 5% are available and, based on the average house price, mean putting down a £12,500 deposit - significantly less than the average,” she elaborated.

Meanwhile, average rates for 95% loan-to-value mortgages, which are often favoured by first-time buyers, have decreased over the past two years. The average rate for two-year mortgages stood at 3.26% in March 2020 before sharply rising to 4.48% in September that year. The average rate now stands at 3.11%, according to our data.

Regional differences

The biggest absolute difference between renting and buying was recorded in the Greater London area where renters paid £4,181 more per year than homeowners.

Conversely, Northern Ireland recorded the smallest difference with homeowners benefiting from £205 in savings across the year.

Despite these numbers, Scotland and the North West held the biggest percentage difference between renting and homeowning at 22%.

In Scotland, homeowning costs amounted to £548 per month compared to the average monthly rent of £699. In the North West, homeowner costs were £174 cheaper than those renting per month.

Compare first-time buyer mortgages here

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