Buying a property is still cheaper than renting

The average cost of buying a three bedroom house is £705 a month, compared to £759 a month for tenants

The gap between the costs of renting and buying have reduced significantly during the past five years from £962 a year in 2011 to £651 in 2016.

The average deposit put down by a first-time buyer on a three bedroom house was £30,770.

Buying a home remains cheaper than renting, with first-time buyers spending £651 less a year than tenants, new research has revealed.

The average cost of buying a three-bedroom house was £705 a month, compared to £759 a month for tenants. It is a difference of £54 a month, according to the research by Halifax.

The gap between the costs of renting and buying have reduced significantly during the past five years from £962 a year in 2011 to £651 in 2016.

FIRST-TIME BUYER AVERAGE MONTHLY BUYING COSTS AND RENTAL PAYMENTS FOR THE UK

Average monthly
buying costs
Average monthly
rental payment
% difference£ difference£ Annual Savings
Dec-08£871.71£616.0542%£255.66£3,067.94
Dec-09£577.69£560.733%£16.96£203.54
Dec-10£575.52£605.22-5%-£29.70-£356.39
Dec-11£572.51£652.71-12%-£80.20-£962.39
Dec-12£588.09£661.41-11%-£73.31-£879.78
Dec-13£613.49£691.60-11%-£78.10-£937.23
Dec-14£658.73£720.21-9%-£61.49-£737.82
Dec-15£670.69£743.97-10%-£73.28-£879.38
Dec-16£705.14£759.35-7%-£54.21-£650.54

Sources: Halifax, BM Solutions and ONS. Period covered is 12 months to December 2016

During this period, average rents have risen by £107 a month from £605 a month, while the average cost of buying has increased by £133 a month from £576.

Mortgage rates are much lower today compared to five years ago but the monthly costs associated with buying a property have increased. Halifax attributes this to the higher prices that first-time buyers have to pay for a home compared to five years ago.

Indeed, it suggested that a typical first-time buyer pays 45 per cent more for the same property compared to five years ago.

He explained that the gap has narrowed since 2011 because of the rising prices of a typical first-time buyer house.

The average buying costs were calculated by taking into account mortgage payments, household maintenance and repairs, insurance costs and income lost by funding a deposit rather than saving.

Mr Ellis added: ‘The size of deposit that is often needed is often a major barrier to overcome before the potential financial advantages of home ownership become clearer.

‘While deposits can raise the upfront cost of buying, it is also an important and attractive form of longer-term savings for homeowners, and with rising house prices, it helps contribute towards higher housing wealth.

The average first-time buyer deposit on a three bedroom house is £30,770
‘While prices are at an elevated level, the number of first-time buyers getting on the housing ladder continues to rise and this group now accounts for half of all new home purchase financed by a mortgage.

‘Improving economic conditions, lower rates and Government schemes such as Help to Buy, have played a key part in helping first-time buyers.’

The research also highlighted an increase in first-time buyers, with numbers reaching 338,900 in 2016, up from 312,900 in 2015. It is the highest level since the start of the credit crisis in August, 2007.

By the height of the credit crisis in 2008, the number of first-time buyers had dropped to 192,300. Numbers have since grown by 76 per cent to their current level.

However, numbers still remain 16 per cent below the 402,800 seen in 2006 before the credit crisis struck.

The average deposit put down by a first-time buyer on a three bedroom house is £30,770, Halifax said. It compares to £110,927 in London, which is seven times higher than the lowest in Northern Ireland of £15,830 and more than twice the amount in the south east at £51,082.


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Written by: Houseladder