Research by Halifax has shown that the gap between renting and buying has fallen to its lowest level in almost a decade, with homeowners typically saving £366 per annum compared to renters.
This is a considerable fall from the £900 difference that 2017 saw.
The study showed that, on average, mortgage payments on a three bedroom house in December 2018 were £729 per month, compared to an average monthly payment of £759 for an identical three bed property.
This is an average difference in costs of 4% across the UK. However, this has been fueled by an increase in mortgage costs rather than a fall in rents, which have remained fairly static, and there are substantial regional differences.
What’s included in the research?
The research was based on
These included monthly repayment amounts, income lost by putting down a deposit rather than saving, household maintenance and repair costs, plus the price of home insurance. Rental costs were calculated using data from BM Solutions.
The research did not, however, take into account Stamp Duty, valuation and legal fees, or rental deposits or other tenancy fees.
While the UK average was 4%, there were considerable regional differences. London had the biggest saving, with an average saving by homeowners of £4,475 per annum, or 21%. This is due to a monthly difference between homeowner costs and rental costs of £373.
Outside of London, Scottish homeowners had the highest average annual savings of 20%, equating to £1,574 per annum, thanks to a monthly difference of £131.
In Wales there was a difference of 14%, or £2,000 and in Northern Ireland 7%, or £382. The South East also had savings of 14%, with a saving of £2,025. Yorkshire had the lowest difference at just 5%, where homeowners can enjoy a saving of just £361 each year.
Over the past nine years there have been substantial fluctuations in the difference between buying costs and rental payments. In December 2008, renters enjoyed savings of 41% compared to buyers, a saving of £3,060 per annum.
By 2009, this had dropped dramatically to a difference of 3%, or a saving for renters of £204 per year, or £17 per month. Since then, buyers have had the upper hand, starting with savings of £360 in 2010, or 5%.
The highest difference occurred in 2011, with homeowners enjoying savings of 12%, which equated to a monetary value of £942.
The Halifax’s comments
Russell Galley, managing director of Halifax, said: ‘The gap between buying and renting is narrowing, primarily driven by reduced first time buyer prices deposits in some regions and continuing house price growth, meaning buyers are paying more on their mortgages.
‘With more products available for borrowers, these factors combined have pushed up the price of buying quicker than the price of renting. Meanwhile, the cost of rent, household maintenance and average deposits have remained broadly flat.’