In fact, first-time buyer mortgage repayments are 20% – or £210 a month – lower than rent across Great Britain according to the new research by Zoopla.
The property website’s analysis found first-time buyer mortgage payments are typically £1,038 per month but this compares to an average of £1,248 per month being paid in rent.
It comes as house price growth has stabilised but rents have increased by up to 32% in five years, said Zoopla.
The gap between buying versus renting, the analysis found, was widest in the North East, where mortgage repayments were 24% below rents.
But it is cheaper to buy than rent across almost all areas of the UK, the study found. The exception is the East of England, where it is 9% more expensive. And the cost of buying versus renting narrows in the South East and the East Midlands.
Zoopla’s analysis was based on a house purchase where a 20% deposit was paid – this equates to £50,740 for a typical first-time buyer priced property of £253,700.
It analysed the cost of renting and buying across 118 postal areas of Great Britain, and this revealed huge regional variations. Not least in deposit saving.
Zoopla found raising a deposit is a significant constraint for first-time buyers. But an average 20% deposit on a typical first-time buyer home ranges from £27,700 in the North East to £83,400 in London.
As many as 63% of first-time buyers said they received help from family members when buying their first home.
Richard Donnell, executive director at Zoopla, said: “Our renting versus buying analysis is welcome news for would-be first-time buyers looking to buy their first home, having faced steep increases in rents over the last three years.
“There remain challenges facing first-time buyers, especially those on average incomes or with small deposits.
There are other difficulties too. Mortgage regulations introduced in 2015 to stop a housing market boom and bust have created a higher hurdle to home ownership for those on middle incomes. These are people who can afford to make rental payments but are unable to prove they can afford higher mortgage ‘stress’ rates should borrowing costs increase in the future.
There are currently proposals to review the rules around stress testing on mortgages to support more people into homeownership. The financial regulator, the FCA, is launching a consultation to look at stress testing and is encouraging greater flexibility amongst lenders.
Donnell said: ““Proposals to review regulations around mortgages are welcome. We do not want to return to the loose lending that preceded the global financial crisis.
“A modest loosening in lending rules with mortgage stress testing rates closer to 6% to 7% would help more middle to higher income renters access home ownership and ease some of the pressure in the rental market without causing a boom in house prices.”
