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 –£123per 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: “Lock down 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 f irst 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 gamechanger f or those saving hard to take the f irst 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 £4,822a year  better of f than those renting. In the South East buyersare£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 £397a year better off, followed by East Midlands, where homeowners are  saving on average £897and Yorkshire and the Humber, where  buyers are ending up with around £961a year compared to those who are renting.