First-Timers better off buying than renting

22 February 2016

  • Annual savings of £865 for buying rather renting, up from £760 in 2014
  • Saving gap between buying and renting more than doubles over last five years
  • South East the only region where renting is the cheaper option

First-time buyers in the UK are on average £865 (10%) a year better off with their own home compared to those who rent, according to research by Lloyds Bank. The average monthly buying cost (including mortgage payments) associated with a first-time buyer purchasing a three bedroom house stood at £672 in December 2015; £72 (or 10%) lower than the typical monthly rent of £744 paid on the same property type.

This represents an increase of £105 over the past year compared with the annual saving associated with buying a home instead of renting of £760 in 2014.  The difference has grown as average monthly rents have increased more steeply (by £24 – a 3% increase) when compared to a £15 (2%) increase in monthly buying costs.

Gap grows significantly in past five years

The current financial gap between buying and renting of £865 is more than double the annual saving of £397 in 2010. Over this period, the average rent has grown by 23% (£139 a month) from £605 whilst average buying costs have increased by 17% (£100 a month) from £572. Buying has consistently been the cheaper option since 2009, when the average monthly payment was £561 for renting compared with £575 for buying. (See Table 1)

Buying more affordable than renting in all regions except the South East

Average monthly buying costs (£965) in the South East are higher (£65) than average monthly rental costs (£900) – the only UK region where renting is the cheaper option. On the other hand, buying is most affordable compared to renting in cash terms in the North West, where the typical first-time buyer is paying £133 a month less than the average renter (£525 against £658); followed by Scotland (£525 against £645, a saving of £120), and Wales (£471 against £574, a saving of £103). (See Table 2)

Number of first-time buyers in the housing market

The number of first-time buyers is estimated to have totalled 310,000 in 2015; largely unchanged from 311,700 in 2014. This represents an increase of almost two-thirds (60%) since the number of first-time buyers fell to a recent low of 193,700 in 2011.

The number of first-time buyers accounted for 46% of all house purchases made with a mortgage in 2015. This share has grown from 36% at the start of the housing downturn in 2007. 

Mike Songer, Mortgage Director, Lloyds Bank said:

"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. In 2015 this gap widened by over £100 to an annual saving of £865.

“This has been helped by record low mortgage rates and rising private rents, making owning a home a much more attractive proposition than renting.

"This steady improvement in the costs of buying compared to renting has helped to boost the number of first-time buyers over the past few years, who now account for 46% of all home sales in 2015 – up from 36% in 2006. Official government schemes, such as Help to Buy have also played a part in helping first-time buyers as have improving economic conditions."