Owning a home is cheaper than renting anywhere in the UK

Published by Hannah Nemeth on 20 June 2018.
Last updated on 20 June 2018

Rentingvsbuying

First-time buyers would pay less, on average, on mortgage payments if they bought a property than if they rented one, according to new research.

The findings from Santander show that homeowners could save £189 a month, or £2,268 a year, if they could afford to buy a property. The average monthly rent in the UK is currently £912 per household, compared to monthly mortgage repayments of £723, based on an average mortgage rate of 2.48%.

But although it may be cheaper to own a home, saving up for a deposit is one of the key obstacles to homeownership, with buyers typically paying a whopping £51,905 for a deposit on their first home. Two in five (38%) first-time buyers would consider moving back in with their parents to save for a deposit, while 21% would give up alcohol.

Londoners could make the biggest saving, as the monthly rent is typically £289 higher than monthly mortgage payments, or £3,468 more a year. In contrast, those living in the East of England will see little difference between the two options, with homeownership costing £43 a month less than renting.

Kevin Roberts, director of Legal & General Mortgage Club, comments: “Unlike renting, a homeowners’ deposit and mortgage payments help build up equity, and the chance for a borrower to own their home outright. However, for many aspiring homeowners, saving for this initial deposit is easier said than done, with many having to rely on the Bank of Mum and Dad. 

“One of the challenges many would-be homeowners face is putting enough money aside for a deposit, while balancing other monthly outgoings such as rent, bills, and recreational spending. With over 40% of income spent on rent, this is ultimately leading to some borrowers who may appear perfectly lendable to on paper, remaining in the private rental sector.”

Ishaan Malhi, chief executive of online mortgage broker Trussle, adds: “It can be extremely difficult for anyone renting to get on the property ladder, especially in London where the average person spends virtually half of their net earnings on rent.

“For those who feel as though they're locked out of homeownership, there are a few options to consider that'll make it easier to get on the ladder. One route is to club together with one or more people to split the cost of the deposit and share the mortgage. There are also useful saving tools worth considering, such as a government-backed Help to Buy Isa, which will boost your savings by 25% up to £12,000. 

“Once you’re in a position to look for a mortgage, go through a broker with access to most of the market rather than going direct to a lender, to increase your chance of finding the right deal and ultimately save money.”

Comparison of average rental and mortgage costs by region 
UK region Average rent Average FTB house price Average FTB deposit Average monthly FTB mortgage repayment Amount better off buying (per month) Amount better off buying (per year)
London £1,569 £420,500 £134,660 £1,280 £289 £3,468
Northern Ireland £629 £131,076 £30,435 £451 £178 £2,136
North West £689 £149,816 £29,877 £537 £152 £1,824
Scotland £644 £142,329 £28,311 £510 £134 £1,608
Yorkshire and The Humber £623 £143,810 £27,527 £521 £102 £1,224
West Midlands £679 £168,287 £35,207 £596 £83 £996
South West £799 £212,062 £50,514 £723 £76 £912
South East £998 £276,807 £67,866 £935 £63 £756
Wales £596 £146,557 £27,135 £535 £61 £732
North East £509 £123,189 £22,712 £450 £59 £708
East Midlands £622 £161,682 £32,816 £577 £45 £540
East of England £622 £252,158 £59,553 £862 £43 £516
United Kingdom £912 £213,462 £51,905 £723 £189 £2,268
FTB stands for first-time buyers. Source: Santander Mortgages, May 2018

 

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I feel so sorry for my grand

I feel so sorry for my grand children and youngsters in general . It is ironic that financial advice regarding this is often from those who benefit most from the appalling situation. Offered solutions such as joint ownership, the bank of mum and dad, or joint mortgages with parents, only seeks to maintain the status quo for the smiling profiteers.

Renting may well be cheaper

Renting may well be cheaper in most regions above as owners pay for repairs and council tax or rates etc.

Hi, I’m not sure about the

Hi, I’m not sure about the maths in this research here. I am currently renting a 3-bed flat in southeast London, paying £1,800 per month. A nextdoor 3-bed flat of equal size, design is on market for £630k. So using rightmove mortgage calculator, 25 years at annual rate 3.9%, I’d have to put down more than £270k to get my monthly mortgage rate on par with my rent... And I wouldn’t even feel that thrilled owning a relatively boxy place. This market is indeed in crisis, not just for millennials but for any poor soul who missed the boat on the housing price boom of past decade.