Lockdown leaves first-time buyers £800 a year better off than renters

05 April 2021

First-time buyers are now saving more than £800 a year as the gap between buying and renting has stretched by 8% in the past 12 months, according to new data from Halifax.

The Halifax Buying vs Renting Review is based on the housing costs* associated with a mortgage on a three-bed home, compared to the average monthly rent of  the same property type.

Monthly rental costs have increased by 10% to £821 in the past year, while monthly buying costs have increased by 1% to £753 during the same period. The difference was only 1% in 2019,  which dropped sharply from the previous year, when the monthly difference between buying versus renting was 10%.

Over the past decade, average monthly buying costs have increased by almost a third (31%), while the cost of renting has gone up by 36% during that time. The starkest contrast was when the gap reached 17% in 2015 –£123 per month – and tightest in 2019. This was primarily driven by increased average mortgage payments and the rise in the deposit amount.

Whilst the average first-time buyer deposit amount has gone up £11,677 since before the start of the pandemic (March  2020) to £58,986, and the average mortgage payment has increased, low interest rates have meant the mortgage payment is up less than rental payments.

Andrew Asaam, Mortgages Director, Halifax, said: “Lockdown restrictions may have held back renters planning to buy a property during the past year with its practical challenges, and while the stamp duty holiday race has helped drive record levels of  mortgage approvals, the cost of renting has crept up in the same period.“

Although the biggest savings to be made, of around £5,000 a year, are unsurprisingly in the capital, homeowners in the South East, East Anglia and Scotland are also making the biggest savings a year, around £2,000 on average compared to their neighbours who are renting.

“Raising a deposit is still the biggest challenge for those looking to get on to the property ladder, but the average first home deposit has gone up by another £11,000 since the start of  the pandemic.

“We know that first-time buyers will benefit from steps that make finding a deposit more of a reality and the new Help to Buy Mortgage Guarantee scheme could be a game changer for those saving hard to take the first step and of ten paying rent at the same time. We have also committed to lending £10bn in 2021 to help people buy their first home this year.”

Buyers in London are on average £4,822 a year better off than those renting. In the South East buyers are £2,597 a year better off, followed by East Anglia (£2,019) and Scotland (£2,010).

The slimmest gap between buying and renting is in Northern  Ireland, where buyers are £397 a year better off, followed by East Midlands, where homeowners are saving on average £897 and Yorkshire and the Humber, where  buyers are ending up with around £961 a year compared to those who are renting.