Buying or renting – which is cheaper?

First-time buyers are paying £115, or 13%, less monthly than those who rent an equivalent home, data analysis by mortgage lender Halifax has revealed.

Annual homeownership costs were £1,378 cheaper than renting in 2021.

This means that over a 25-year mortgage, buying a house is cheaper by £27,600 than renting one.

These were some of the findings in the latest Halifax Buying vs Renting Review, which 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.

The gap had narrowed in the past three years, but is now at its widest since 2017, and is over £1,200 greater than its historical low in 2019 (£116 annual saving).

However, Halifax said that the current annual difference is not as great as in 2015, when annual ownership costs were £1,476 less than those for renting.

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.

Esther Djikstra, director of mortgages at Halifax, said that historic lows for interest rates have kept mortgage costs down, compared to rents.

“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,” Djikstra said.

“Deposits from 5% are available and, based on the average house price, mean putting down a £12,500 deposit – significantly less than the average.”

Written by: Houseladder