First-time buyers almost 10% better off buying than renting

14 February 2015

Annual savings of £742 for those getting on the housing ladder

 First-time buyers in the UK are £742 (9%) a year better off with their own home compared to those who rent, according to research by Halifax. The average monthly buying cost (including mortgage payments1) associated with a first-time buyer buying a three bedroom house stood at £6582 in December 2014; £62 (or 9%) lower than the typical monthly rent of £7203 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 (12%) to £62 since 2013 as the average monthly buying costs grew by £46 while average monthly rents increased by £28 (see Table 1). 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 (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; a saving of £112 a month (£1,338 over the year) or 8%.

 The second largest difference is found in the North West where first-time buyers were paying 17% less a month (£109 a month or £1,304 annually) than the typical private tenant in the region – (see Table 2).

 The smallest differences between the monthly cost of buying and renting are in the East Midlands (£6 or 1%) and the South East (£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 (£576 versus £561). Since 2009 the substantial improvement in the affordability of buying relative to renting largely reflects a 28% (£159) rise in average monthly rental costs over the past five years. This increase was twice as fast as the 14% (or £83) rise in average monthly buying costs.

Lloyds Banking Group’s Helping Britain Prosper Plan includes a pledge to support one in four first-time buyers and one in four new build purchases. In 2014 around 80,000 first time buyers were helped onto the housing ladder by Lloyds Banking Group brands.

 Craig McKinlay, Mortgage Director, Halifax said:

"Average home buying costs are significantly lower than average rental costs, providing first-time buyers with a large financial saving if they can get on the housing ladder. 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.

 “A healthy mortgage market is key to a thriving economy. It is for this reason that helping more customers get on the housing ladder is a key commitment within the Group's Helping Britain Prosper Plan, and Halifax is committed to playing a key role in delivering upon that Plan."