Renting more expensive than home ownership

MONTHLY mortgage costs are now 13 per cent lower than the cost of renting an equivalent home, according to the Halifax.

The Halifax buying versus renting review is based on the cost of a mortgage on a three-bedroom home, compared to the average monthly rent of the same property type.

Last year, average monthly rental costs grew by six per cent to £874, while buying costs grew just two per cent to £759 — a monthly difference of £115, or £1,380 for a full year.

The difference could add up to more than £27,600 over the course of a 25-year mortgage.

The gap between the annual cost of rent and home ownership in absolute terms is greatest in London, where renting is £4,181 more costly. In the southeast of England, it is £3,146.

Esther Djikstra, mortgages director of the Halifax, said: “Over the last year, we have seen record numbers of buyers entering the market, moving to bigger properties and taking advantage of the Stamp Duty holiday. However, historic lows for interest rates have kept mortgage costs down, compared to rents.

“Still, before homebuyers can benefit from lower monthly costs, a deposit needs to be put together, still the greatest challenge for many first-time buyers.

“The £62,000 average deposit we see in our data may be an unimaginable sum to potential first-time buyers, but it’s much higher than many need to get a foot on their housing ladder.

“Deposits from five per cent are available and, based on the average house price, this means putting down a £12,500 deposit — significantly less than average.”