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NEWSFLASH: It’s £672/yr cheaper to buy than rent

NEWSFLASH: It’s £672/yr cheaper to buy than rent

Category: Mortgages

Updated: 25/08/2015
First Published: 24/08/2015

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 It is now over 6 months old so the content may be out of date.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 hoping to get on the housing ladder in the near future, we've got some great news – research from Halifax has revealed that it's actually £672 cheaper per year to buy a home than to rent one! So, is it time to get in on the action?

Monthly costs are 8% lower

The figures show that the average monthly costs associated with buying a three-bedroom house in the UK for a first-time buyer (including mortgage repayments, insurance, household maintenance and repair, among others) was £666 in June this year, a full 8% (or £56) lower than the average rent paid on the same property type, which currently stands at £722 per month. That equates to an annual saving of £672, and this kind of sum can quickly add up!

However, if you want to make the most of the saving, you'll need to be quick, as the difference is narrowing – and it's largely thanks to rising house prices. Halifax's research went on to reveal that the price of a typical first-time buyer home has risen by 8% in the last year, resulting in monthly mortgage costs rising by £40 over the same period. In comparison, average rents have only increased by £8 on an annual basis, which has caused the difference between the cost of owning and renting to narrow from £85 in 2014 to £56 today.

Nonetheless, the figures still stand in sharp contrast to those seen during the height of the financial crisis, with the average cost of buying a first home in June 2009 being 16% (or a whopping £1,154 per year) more than the average rent paid, highlighting how much the tables have turned. This is despite the fact that the average price paid by first-time buyers for a three bedroom house is 25% higher than it was six years ago – the monthly costs of owning has fallen thanks to the average mortgage rate reducing to 2.91%, down from 4.92% in 2009, while average rents have grown by 23% in the same period.

First-time buyers are taking note

It seems that this improved affordability is having the desired impact, with figures from the Council of Mortgage Lenders (CML) showing that there were 136,100 first-time buyers in the first six months of 2015. This is the second-highest total for the first half of a year since 2009 – and is 87% higher than the 72,700 transactions recorded during that period – being second only to 2014, when the figure stood at 149,500.

The slight slowdown from 2014 is arguably due to the ongoing lack of supply, with the stock of new homes for sale falling to new record lows. Craig McKinlay, mortgage director at Halifax, commented: "Looking at monthly costs, the combination of lower mortgage rates and declining rental value over the past six years has made it cheaper to buy than to rent. [However,] while numbers of first-time buyers getting on to the housing ladder in the first six months of both 2014 and 2015 has been over 135,000 – almost double the lows seen in 2009 – the issue of building more new homes in the right places needs to be addressed if we are to see sustainable growth."

Get involved!

If you want the chance to save £672 per year – and own your home at the end of it – why not get involved? You'll of course need to have saved up a suitable deposit, but if you've managed to be ruthless with your spending and have built up a decent sum in your dedicated savings account, it could be a great time to take the plunge!

Average mortgage rates are still at record lows (and at higher loan-to-values, they're still falling), so why not compare the options and see what's out there? Given that there are so many great first-time buyer mortgage deals to choose from, you could easily save money when compared with renting, and if you do it soon, you could beat the rate rise and save money for the long term.

What next?

Compare first-time buyer mortgage deals

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.