In the UK, an estimated 65% of people own their homes, and new research shows getting on the property ladder can be cheaper in the long run than renting.
Santander Mortgages has released new research on the monetary difference between buying a property and renting. Their findings show that for first-time buyers anywhere in the UK, the monthly outgoings and mortgage payments are less than the cost of renting a comparable property.
Climbing onto the property ladder will put cash in a first-time buyer’s pocket and provide more lifestyle choices, from home improvements to paying for a summer holiday, the data reveals. Currently, an average first-time buyer’s monthly mortgage repayments are £723 compared with the average monthly rental of £912. This means that during the course of a year, new homeowners could save around £2,268, equating to £189 per month compared to renters.
The challenge of homeownership
Miguel Sard, managing director of Mortgages at Santander UK, said: “Average first-time buyers could save over £2,250 a year once on the property ladder compared to renting, with those in London saving the most, as the average monthly rent is £289 higher than monthly mortgage payments.
“Understandably, for first-time buyers the challenge is saving for a deposit and affording the upfront costs. However, this research proves that once you have bought a property, owners will not be under greater financial pressure and in the long term the financial benefits can be significant.
“The annual savings averaging well over £2,000 can really amount to a decent nest egg and years down the line, once the mortgage is paid off, owners will have a profitable asset to show for it.”
Where is it cheaper to buy?
Lack of affordable housing to buy in London and the south-east has previously made renting a more financially viable option. However, over the last eight years, we have seen inflation fall and mortgage lending rates decrease significantly, while rental values have increased steadily.
Now, people deciding to buy rather than rent in the capital can make the largest savings. With average rents costing £289 per month more than a comparable mortgage payment, homeowners can save around £3,500 over 12 months compared to renting.
The reverse is only true in the east of England, where on average a first-time buyer’s mortgage is £43 per month higher than the average rent.
How to climb the property ladder
The initial deposit of £51,905 that an average first-time buyer requires is a big ask. In Santander’s research, 38% of people would be prepared to move back in with their parents to save the deposit; others were considering how the government’s Help to Buy Scheme and Starter Home plan could help a purchase.
Around 22% of those looking to buy said they would consider selling shares in the property, offering a potential capital return when the property is sold, and 21% said giving up alcohol was an option to raise the cash.
