Buying almost £1400 cheaper than renting


22 March 2022

  • Annual homeownership costs were £1378 cheaper than renting in 2021
  • The cost gap is greatest in Scotland and the North West (22%)
  • Annual saving for homeowners over £400 more than 10 years ago

 

The monthly housing costs for first-time buyers are now £115 (13%) lower than the cost of renting an equivalent home, and the difference could add up to more than £27,600 over a 25-year mortgage, according to analysis by 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.

Last year, monthly rental costs grew by 6% to £874, while buying costs grew just 2% to £759, a monthly difference of £115, or £1,378 for the full year.

Having narrowed in each of the last three years, the gap is now at its widest since 2017, and is over £1,200 greater than its historical low in 2019 (£116 annual saving). However, the current difference (£1,378) is not as great as in 2015, when annual ownership costs were £1,476 less than those for renting.

Table 1: UK average monthly buying costs and rental payments (Source: Halifax, Birmingham Midshires and ONS)

  Average monthly buying costs Average monthly rental payment % Difference £ Difference monthly £ Annual savings
Dec-09  £578 £561 3% £17 £206
Dec-10 £576 £605 -5% -£29 -£354
Dec-11 £573 £653 -12% -£80 -£960
Dec-12 £588 £661 -11% -£73 -£877
Dec-13 £582 £692 -16% -£110 -£1,321
Dec-14 £614 £720 -15% -£106 -£1,278
Dec-15 £621 £744 -17% -£123 -£1,476
Dec-16 £646 £759 -15% -£113 -£1,358
Dec-17 £640 £754 -15% -£114 -£1,369
Dec-18 £679 £759 -11% -£80 -£959
Dec-19 £737 £747 -1% -£10 -£116
Dec-20 £745 £821 -9% -£77 -£922
Dec-21 £759 £874 -13% -£115 -£1,378

The biggest differences proportionately were in Scotland and the North West at 22%, while the gap between annual rent and ownership in absolute terms was greatest in London, where renting is £4,181 more costly. The smallest gap was seen in Northern Ireland, where renting was just £17 per month (3%) higher than ownership. (£205 per year) (See Table 2)

Table 2: Average monthly buying and rental costs by region, December 2021

Region Average monthly buying costs Average monthly rental costs % Difference £ monthly difference £ Annual savings 
North £494 £576 -14% -£83 -£993
Yorkshire & the Humber £561 £617 -9% -£56 -£675
North West £617 £791 -22% -£173 -£2,081
East Midlands £660 £731 -10% -£71 -£850
West Midlands £654 £778 -16% -£124 -£1,490
East Anglia £758 £858 -12% -£100 -£1,198
Wales £596 £703 -15% -£108 -£1,292
South West £804 £973 -17% -£169 -£2,034
South East £1,025 £1,287 -20% -£262 -£3,146
Greater London £1,355 £1,703 -20% -£348 -£4,181
Northern Ireland £476 £493 -3% -£17 -£205
Scotland £548 £699 -22% -£151 -£1,817
UK £759 £874 -13% -£115 -£1,378

Esther Djikstra, Mortgages Director, Halifax, said: “Over the last year, we have seen record numbers of buyers entering the market, moving to bigger properties and taking advantage of the Stamp Duty holiday. However, historic lows for interest rates have kept mortgage costs down, compared to rents. For the second year running, buyers in Scotland see the greatest proportional difference in costs compared to renters and are joined this year by those in the North West of England, where rents are over a fifth more than buying costs.”

“Still, before homebuyers can benefit from lower monthly costs, a deposit needs to be put together, still the greatest challenge for many first-time buyers. The £62,000 average deposit we see in our data may be an unimaginable sum to potential first-time buyers, but it’s much higher than many need to get a foot on their housing ladder. Deposits from 5% are available and, based on the average house price, mean putting down a £12,500 deposit - significantly less than the average.”

The average deposit, as a proportion of house price, rose only marginally from 24% in 2020 to 25% in 2021. However, in absolute cost terms it rose £5,334 to £62,415, a growth of 9%. (See Table 3)

Table 3: First-time buyer average house price, mortgage advance and deposit, 2020, 2021

                                                                                                                                                                                                                                                             

Region Average House Price 2020 (£s)  Average Mortgage 2020 (£s)  Average Deposit 2020 (£s) Average Deposit 2020 (% of price)  Average House Price 2021 (£s)  Average Mortgage 2021  (£s) Average Deposit 2021 (£s)  Average Deposit 2021 (% price)
North        148,404 119,376 29,027 20% 154,917 122,922 31,995 21%
Yorkshire & Humberside            168,815 134,276 34,539 20% 177,699 138,792 38,907 22%
North West 178,118 141,407 36,712 21% 193,881 151,625 42,256 22%
East Midlands 196,194 152,590 43,604 22% 212,041 161,907 50,133 24%
West Midlands 202,473 156,729 45,744 23% 213,727 162,866 50,862 24%
East Anglia 238,015 180,401 57,615 24% 254,673 187,990 66,683 26%
Wales 164,857 134,604 30,254 18% 179,384 143,769 35,615 20%
South West 245,729 186,406 59,323 24% 266,782 196,501 70,281 26%
South East 334,018 249,516 84,502 25% 348,931 255,803 93,128 27%
Greater London 514,449 347,228 167,221 33% 521,010 347,989 173,021 33%
Northern Ireland 137,218 107,384 29,834 22% 147,549 113,487 34,062 23%
Scotland 159,054 126,378 32,676 21% 171,371 136,396 34,975 20%
UK 241,529 184,448 57,081 24% 251,040 188,625 62,415 25%

Source: Halifax, 12-month rolling to December 2020, 2021, UK Finance