Owning a home is cheaper than renting and the average first-time buyer could save more than £2,250 a year by getting on the property ladder.
New research unveiled today by Santander Mortgages discovered Londoners, although living in the location with the most expensive homes, could also make the biggest savings by becoming homeowners.
Indeed, the average monthly rent in the capital is £289 higher than monthly mortgage payments.
But in every region of the UK, the average monthly rent is topping mortgage payments by a significant amount with the average UK tenant paying £912 per month on rent compared to the £723 the average first-time buyer will be repaying monthly to their mortgage lender.
It means homeowners could save an average of £189 a month or £2,268 a year compared to renters.
Miguel Sard, managing director of mortgages at Santander, said many people assume buying a property will put them under greater financial pressure.
He added: “Of course, buying a property is a major financial investment with upfront costs to consider, but long term the financial benefits can be significant.
“With annual savings averaging well over £2,000, this can really mount up over time and of course once the mortgage is paid off you have a valuable asset to show for it.”
Challenges of finding a deposit
Santander’s research also discovered many first-time buyers were looking at alternative methods for saving for the deposit, which currently averages at £51,905.
One in five of said they would consider selling shares, a theoretical option for which there is currently no facility available but which could offer a potential capital return when the property was sold.
Another 38% would consider moving back home with their parents to save for the deposit and 21% said they would give up alcohol to raise the money to get onto the property ladder.
Kevin Roberts, director of Legal & General Mortgage Club, said putting money aside for a deposit whilst also balancing other monthly outgoings such as rent, bills and recreation was a big challenge for would-be homeowners.
“With over 40% of income spent on rent,” he said, “this is ultimately leading to some borrowers who may appear perfectly lendable to on paper, remaining the private rental sector.
“Building more affordable housing is certainly a step in the right direction – yet this isn’t enough. As an industry, we need to find other ways to help these borrowers move into homeownership; whether that’s creating more intergenerational products, rethinking affordability criteria by tracking rental payments, or finding alternative methods for borrowers to save for a deposit.”
