Homebuyers in the UK are £875 (10 per cent) a year better off buying their own home instead of renting, according to research by Halifax.
The average monthly costs associated with buying a three bedroom house stood at £672 in June 2013; £73 (or 10 per cent) lower than the typical monthly rent of £745 paid on the same property type. The percentage difference between the monthly cost of buying and renting has fallen marginally from a year earlier.
Five years ago renting was considerably financially more attractive than buying. In June 2008 the average monthly cost associated with home buying was £352 (49 per cent) higher than renting – equivalent to an annual cost difference of £4,226. The substantial improvement in the affordability of buying relative to renting since 2008 largely reflects a 37 per cent decline in home buying costs over the past five years.
Both lower house prices and mortgage rates have contributed to making home buying more affordable. The average mortgage rate for a new borrower has fallen by 2.31 per cent over the past five years from 5.88 per cent in June 2008 to 3.57 per cent in June 2013. The average house price has fallen by 13 per centover the same period. The typical rent paid, however, has increased by 13 per cent (£88) since June 2010.
Buying a house is more affordable than renting in all but two regions in the UK. Average monthly buying costs in both Yorkshire and the Humber and Wales are marginally higher (1 per cent) than average monthly rental costs. On the other hand, buying is most affordable compared to renting in percentage terms in Northern Ireland where the typical homebuyer paying 11 per cent (£47) a month less than the average renter (£369 against £415). In cash terms, the average monthly cost of buying in London is £98 lower than renting.
Martin Ellis, housing economist at Halifax, commented: “A combination of lower mortgage rates and declining house prices has substantially reduced the cost of buying over the past six years. Nevertheless, the number of home buyers in the twelve months to June 2013 was nearly half of that in 2008, which will have been constrained by worries over job security.
“We understand that building a deposit is still a key challenge for those looking to get on the ladder, although once this has been achieved, buying is much more affordable. Whilst optimism in the housing market has improved in recent months these factors remain key obstacles to home purchases.”
