Buying Beats Renting
Buying a home is now significantly cheaper than renting across most of Great Britain, according to research from property website Zoopla. The average monthly mortgage payment for first-time buyers (FTBs)stands at £1,038, which is 20% lower than the average monthly rent of £1,248. This analysis assumes buyers have a 20% deposit, which works out as £50,740 based on the typical FTB home priced at £253,700. In London, where affordability is stretched, deposits tend to be higher, averaging 30%.
The regional cost gap
Mortgage payments are 24% lower than rents in the North East, the widest gap in the country. Other areas showing large savings for buyers include Glasgow (46% cheaper to buy), Newcastle (34%), and Cardiff (31%). However, in the East of England, it’s still 9% more expensive to buy than rent. In 10% of postal areas, buying costs more, led by Harrogate, where mortgage payments are 15% higher than rents.
Despite the current advantage for homeowners, affordability remains a major hurdle for many first-time buyers. Raising a deposit is one of the biggest challenges, with average deposits ranging from £27,700 in the North East to £83,400 in London. Nearly two-thirds of FTBs say they’ve needed help from family to cover the upfront costs.
Getting on the ladder remains challenging
Tougher mortgage regulations introduced in 2015 are also making it harder to achieve home ownership. Lenders now expect buyers to prove they can manage repayments even if interest rates rise. Many currently use a ‘stress test’ of 8%, well above current mortgage rates, which can push monthly repayments above rental costs, even in areas where buying is typically cheaper.
Zoopla’s Executive Director, Richard Donnell, said, “Our renting versus buying analysis is welcome news for would-be first-time buyers looking to buy their first home, having faced steep increases in rents over the last three years.” However, he added, “There remain challenges facing first-time buyers, especially those on average incomes or with small deposits… The more first-time buyers priced out of home ownership, the greater the pressure on the private rental market and rental levels.”
Donnell welcomed proposals to review mortgage lending rules, suggesting stress testing rates closer to 6% or 7% would help more people buy without triggering a surge in house prices. “We do not want to return to the loose lending that preceded the global financial crisis,” he said. “But modest changes could ease the way for middle-income renters to become homeowners.”
Looking to buy your first home but not sure where to begin? Get in touch, because we’re here to guide you every step of the way.
Your home may be repossessed if you do not keep up repayments on your mortgage
