First-timers are better off buying than renting - Mortgages - News |

News News brings you the latest financial & economic news & reviews of the best products in the UK by our team of money experts.

First-timers are better off buying than renting

First-timers are better off buying than renting

Category: Mortgages

Updated: 15/03/2016
First Published: 19/02/2016

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

If you're in rented accommodation, you'll probably know how difficult it is to save up a deposit to buy your first home. However, a bit of sacrifice could be worth it in the long run, as research from Lloyds Bank has revealed that first-timers could be as much as 10% better off per year if they bought their own home…

The figures show that first-time buyers are, on average, £865 a year better off with their own home compared with those who rent. In fact, the average monthly buying cost (including mortgage payments) associated with a first-timer buying a three-bedroom house stood at £672 in December 2015, a whole £72 (or 10%) lower than the typical monthly rent of £744 paid on the same property type.

This kind of cash can seriously add up over the year, and homeowner savings are becoming increasingly stark: the current £865 annual saving represents an increase of £105 over the past year (buyers saved an average of £760 per year in 2014), with the difference having grown as a result of average monthly rents increasing more steeply (up by £24, a 3% increase) than the increase in monthly buying costs (up by £15, or 2%, year-on-year).

Looking further back highlights an even greater level of improvement, with buyers saving an average of just £397 a year in 2010. Since then, average rents have grown by 23% (£139 a month) from £605, while average buying costs have increased by a lesser 17% (£100 a month) from £572, with buying being consistently cheaper ever since.

Mike Songer, of Lloyds Bank, commented on the findings: "We've seen a significant shift over the past five years, with people consistently paying less on average per month when owning their property as opposed to renting. This has been helped by record low mortgage rates and rising private rents, making owning a home a much more attractive proposition than renting."

Essentially, this all means that, although buying a home may initially appear to be more expensive, it's actually far more cost-effective than renting. Unfortunately, the discrepancy – and ever-increasing rents – only makes it harder for renters to save up for a deposit, which is why it's so important to be strict with your spending habits to reach your goals.

What next?

Find the right savings account to build your deposit

Time to take the plunge? Compare mortgage rates

Disclaimer: Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time.