Mar

Gap between renting and home ownership cost narrows as mortgage payments rise

admin

First time buyers remain better off owning than renting an equivalent home, Lloyds Bank says, but the gap is narrowing.

Its latest Owning vs Renting Review reveals that owning a first home now costs £971 a month, four percent less than renting at £1,013.

Historically, home ownership on a monthly basis has always been cheaper and particularly so in recent years when mortgage rates have been at rock bottom.

The latest research is based on a three-bedroom property, but Lloyds Bank points out that the gap is narrowing – seven years ago first time buyers were £156 a month better off compared to their renting counterparts. The current gap is £42.

The report uses average rents and compares it to average mortgage size, deposits and house prices nationally and regionally.

These figures are for the national picture, but regional variations are considerable with Scots home owners enjoying the biggest gap (£60 a month) while in the East of England renters are £90 a month better off than home owners.

The biggest gap is in London, where first time buyers are some £250 a month better off than renters every month.

Difficult

“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,” says Kim Kinnaird, Mortgages Director, Halifax (pictured).

“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.”

As Kinnaird suggests, renting is a much cheaper housing sector to enter – renters need a £1,244 deposit on average to secure a tenancy, whereas first time buyers need to scrape £60,000 together to pay the average 24% deposit.

Read the full report.

View Full Article: Gap between renting and home ownership cost narrows as mortgage payments rise