"With rents having risen sharply over the last two years, many are already managing monthly payments that are higher than a typical mortgage. That’s why low-deposit mortgages could be the right solution for many"
- Amanda Bryden - Halifax
First-time buyers in Britain can often pay less for a mortgage than they would for rent, even with a low 5% deposit, according to new research from Lloyds. On average, monthly mortgage payments for first-time buyers are 17% cheaper than renting, potentially saving thousands each year.
The study compares typical first-time buyer mortgage payments with average monthly rental costs in 11 major UK cities outside London. In nine of these cities, owning a home is more affordable than renting on a monthly basis.
A 5% deposit equates to £11,412, based on an average first-time buyer property price of £228,233. Calculations use a 4.78% interest rate fixed for five years with a 30-year repayment term, highlighting how low-deposit mortgages can make homeownership more accessible.
Encouragingly, a Lloyds survey found that 45% of prospective first-time buyers who have started saving already have £10,000 or more set aside, putting them on track to meet a 5% deposit in many cities.
However, while buying is often cheaper, it may not suit everyone. Flexibility, job mobility, and lifestyle preferences mean renting still works for some. However, for those ready to settle, the financial case for buying is becoming increasingly compelling.
Where first-time buyers can save
Glasgow tops the list, where mortgage payments are about 32% cheaper than rent. Buyers could save £396 a month or £4,752 a year. With an average first-time buyer property priced at £172,000, a 5% deposit of £8,600 is enough to get on the ladder.
Newcastle follows, with first-time buyers paying 20% less for a mortgage than rent. That translates to a monthly saving of £217, or £2,604 annually. With an average property price of £180,000, a £9,000 deposit can secure a first home.
Nottingham also offers savings, with mortgage payments £86 lower than rent each month, or £1,032 annually. First-time buyers would need a 5% deposit of £9,150 on a £183,000 property.
“We know that saving for a deposit is one of the biggest hurdles for first-time buyers,” said Amanda Bryden, head of mortgages at Lloyds. “With rents having risen sharply over the last two years, many are already managing monthly payments that are higher than a typical mortgage. That’s why low-deposit mortgages could be the right solution for many – helping people move from renting to owning sooner than they thought possible. It’s also important to consider other upfront costs like legal fees and moving expenses, but for most, the long-term savings will outweigh these.”
Building long-term financial security
Owning a home goes beyond monthly savings. A first-time buyer with a 5% deposit could reduce their loan-to-value ratio from 95% to 87% over five years, even if property prices remain flat. This builds equity, reduces the risk of negative equity, and improves access to future mortgage deals.
Combined with savings from cheaper mortgage payments, a first-time buyer could be around £32,000 better off over five years, or £20,500 when factoring in the initial deposit.
Glasgow again leads the way, with savings accumulating to £23,760 and additional equity of £13,818 over five years, totalling £37,578, or £28,978 net after the deposit. Bristol comes next, where monthly savings total £13,860 and equity rises to £24,985, amounting to £38,845, or £23,295 net.
Even in cities like Cardiff and Sheffield, where renting may be cheaper in the short term, building equity over time generally outweighs these differences.
“There’s no doubt it’s a challenging landscape for first-time buyers, with both property prices and interest rates higher than they were just a few years ago,” Bryden continued. “But buying a home remains one of the best long-term financial decisions most people will ever make. It’s not just cheaper than renting in the short term, as the impact of growing equity in your own home – money that would otherwise have been lost in rent – means a more secure financial future. For anyone thinking about buying, speaking to a mortgage adviser or broker is a great first step. They can help you understand what’s affordable based on your budget and guide you through all the options.”
Getting started
Speak to an expert: A mortgage adviser or broker can help buyers understand affordability, deposits, and additional costs, including legal fees.
Make your savings work: Set up a dedicated savings account or use schemes like the Lifetime ISA, which adds a 25% bonus on savings, up to £1,000 a year.
Explore low-deposit options: Many lenders offer mortgages with only a 5% deposit, making ownership more achievable.
Mary-Lou Press, president of NAEA Propertymark, comments, “While low-deposit mortgage products are helping more first-time buyers access the property market, many still face significant upfront financial hurdles. Recent changes to Stamp Duty in England and Northern Ireland mean that some first-time buyers will also now have additional tax to pay. Beyond the deposit and any relevant property tax, buyers must budget for solicitor fees, mortgage arrangement charges, valuation and survey costs, local authority searches, moving expenses, and insurances."
"In many cases, these additional costs can amount to several thousand pounds, making the initial outlay far higher than just the deposit alone. That said, in some areas, we are seeing that monthly mortgage repayments can still be lower than local rents, especially for buyers securing competitive rates. But affordability must be assessed holistically. First-time buyers need to go in with a clear understanding of both the upfront and ongoing costs of ownership to make an informed decision.”
