First-time buyers £1,300 richer than if they rented

The cost for a first-time buyer of owning a home is now about £1,300 a year less expensive than renting, research has found.

The average monthly cost of running a three-bedroom house for someone taking their first step on the property ladder stands at £677 – £110 lower than the typical monthly rent paid on a similar property, according to the Halifax.

In recent years, cheap mortgage deals have helped to turn round the cost gap between buying and renting a home. Five years ago, the average cost of owning a first property was about £37 a month more expensive than renting, the Halifax said.

Buying has become even cheaper comparatively over the last year, the research found. A year ago, owning a first home was about £93 a month less expensive than renting. The Halifax said that while the typical monthly cost of buying a home has increased by £25 compared with a year ago, typical rental costs have increased at a faster rate, £42 a month, to stand now at £787 a month on average.

Regionally, buying is most cost-effective compared with renting in London, Wales and the West Midlands, the Halifax said. The East Midlands is the only region where potential first-time buyers will still find it cheaper to rent than to buy.

The research assumed that a first-time buyer had a deposit of about 10 per cent, or £15,748 in cash terms, to put down. When considering buying costs, it took into account factors such as mortgage payments, household maintenance, insurance costs and the income that would be lost through funding a deposit rather than having cash sitting in savings.

The Government’s flagship Help to Buy scheme has helped to improve the availability of low-deposit mortgages. However, with speculation mounting over the exact point at which the Bank of England base rate will start rising from its five-year low of 0.5 per cent, homeowners have been warned to think now about how they will cope when the cost of borrowing increases.

Stricter mortgage lending rules came into force at the end of April, forcing lenders to carry out more stringent checks to make sure borrowers can genuinely afford their mortgage payments – both now and when interest rates increase.