Buying is cheaper than renting, but deposit remains big obstacle

New research shows that monthly payments for the mortgage are likely to be cheaper than rent for a comparable home – but only if the purchaser can stump up the deposit and stamp duty to begin with.

The Halifax says the monthly cost of renting has risen 10 per cent in the past year to £821 while the average first time buyer is spending one per cent more this year on their mortgage – £753.

Buyers in London are on average £4,606 a year better off than those renting – easily the largest gap. 

The smallest is in Northern Ireland where buyers were £539 a year typically better off than renters.

So long as a buyer can find the deposit to get on the property ladder, low interest rates have meant monthly mortgage payments have increased more slowly than rents, the Halifax says.

Andrew Asaam, the lender’s mortgages director, says the average first home deposit has gone up £11,000 since the start of the pandemic.

But he regards the new government-backed five per cent deposit mortgage guarantee scheme as a “gamechanger” for those saving hard to buy a home and often paying rent at the same time.

“We have also committed to lending £10 billion in 2021 to help people buy their first home this year” he adds.

The Halifax analysis is based on the typical costs of buying against renting a three-bedroom property.

Average buying costs include mortgage payments, income lost by funding a deposit rather than saving, spending on household maintenance and repairs, and insurance costs.

But critically one off costs such as stamp duty, valuation and legal fees have been excluded.

Mortgage payments are calculated based on average loans made to first-time buyers regionally, according to figures from trade association UK Finance; and rents are calculated from BM Solutions – a buy to let brand owned by Halifax.

Written by: Houseladder