The cost of a mortgage on a first home is typically around £42 per month cheaper than renting, but the difference has reduced and in some parts of the UK renting may be the less expensive option, analysis suggests.
First-time buyers could typically pay around £971 per month for a three-bedroom home, while renters would potentially be forking out around £1,013, according to calculations by Halifax.
The difference of around £500 per year between buying and renting is down from a peak reached in 2016, when owners were saving £1,567 annually.
In 2021, buying a home was found to be around £1,300 per year cheaper than renting, according to Halifax.
Making the move from renting to home-ownership can be difficult for many, as raising a sufficient deposit and then finding the right property can be challenging— Kim Kinnaird, Halifax
To make the calculations, the bank factored in mortgage payments, household maintenance, repairs, minor alterations and insurance costs for home-owners.
It used its own house price data, mortgage figures from UK Finance, as well as data from the Bank of England and the Office for National Statistics.
For renters, it looked at average rental payments, taking data from BM Solutions, a buy-to-let brand in the same banking group as Halifax.
For most sources, the latest research covered the period to the end of 2022, although a small amount included January 2023.
Researchers assumed different deposit sizes would be put down depending on where in the UK someone was buying a home, but the average deposit size across the UK was 23%, or £64,598.
The UK’s biggest gap between owners and renters, in percentage terms, was in Scotland, Halifax said.
Those renting in Scotland faced paying an average £918 per month, compared with £727 for home-owners – a saving of 21% for those on the property ladder.
In cash terms, those who had managed to get on the property ladder in London were nearly £3,000 a year better off than renters, according to the research.
However, Halifax calculated that people in the capital face needing a 32% or £188,663 deposit typically in order to get on the property ladder.
At the other end of the spectrum, first-time buyers in the North East need a £32,920 or 19% deposit on average.
The East of England was found to be the only region where it was typically more expensive to buy a first home than rent one.
Home-owners there faced paying £90 more each month, on average, than those renting, according to the findings.
Rising mortgage rates have been pushing up borrowers’ costs, but, as the housing market softens, there have been some indications of house prices coming off their previous record highs.
Kim Kinnaird, mortgages director, Halifax, said: “Our latest analysis shows that becoming a home-owner can bring significant savings for people.
“Of course, making the move from renting to home-ownership can be difficult for many, as raising a sufficient deposit and then finding the right property can be challenging.
“While a predicted fall in house prices this year will be welcome news for those looking to buy their first home, it doesn’t change the fact that getting on the property ladder remains expensive – a problem that is compounded when rents are high, impacting the ability to save.”
Here is the average monthly cost of owning a home, followed by the average monthly rental payment, the monthly saving for owners compared with renters in percentage and cash terms and the annual saving for owners, according to Halifax (figures have been rounded):
– Scotland, £727, £918, 21%, £191, £2,295
– South West, £1,029, £1,237, 17%, £208, £2,492
– North West, £778, £922, 16%, £145, £1,737
– Wales, £735, £872, 16%, £137, £1,647
– London, £1,828, £2,074, 12%, £246, £2,950
– West Midlands, £839, £951, 12%, £112, £1,342
– Yorkshire and the Humber, £720, £802, 10%, £82, £980
– South East, £1,345, £1,474, 9%, £129, £1,550
– East Midlands, £843, £931, 9%, £88, £1,059
– North East, £628, £685, 8%, £57, £686
– Northern Ireland, £596, £620, 4%, £24, £288
– East of England, £1,212, £1,122, minus 8%, minus £90, minus £1,078
– UK, £971, £1,013, 4%, £42, £498
