"While prices are at an elevated level, the number of first-time buyers getting on the housing ladder continues to rise and this group now accounts for half of all new home purchase financed by a mortgage"
The latest research by Halifax has highlighted a narrowing of annual savings for first-time buyers compared to those who rent. Despite the savings gap narrowing marginally (from £879 in 2015 to £651 in 2016) buying still remains more affordable than renting in all 12 UK regions.
According to Halifax, over the past year, buying costs have risen by 5%, whilst the average rent has risen by 2%.
The average monthly costs (including mortgage payments) associated with buying a three-bedroom house stood at £7,052 in December 2016; £54 (or 7%) lower than the typical monthly rent of £7,593 paid on the same property type.
Buying is most affordable compared to renting in London, with the typical first-time buyer paying £161 (10%) a month less than the average renter (£1,420 against £1,581) an annual saving of £1,927. However, in East Anglia there is only a £7 difference in the average monthly costs between buying and renting (£736 compared to £743).
Since 2011, the financial gap in favour of buying compared to renting has fallen by a third (32%) from £962 a year to £651 in 2016. Over this period, the average rent has risen by £107 a month (16%) from £605, whilst average buying costs have increased by £133 a month (23%) from £576.
Although average mortgage rates for new house purchases are at an unprecedented low, a 45% increase in the price of a typical first-time buyer home has sparked an increase in buying costs during this period.
Martin Ellis, housing economist at Halifax, said: “Although the average costs associated with buying costs have grown at a faster rate than average rents over the past few years, owning a home is still the more financially attractive option. However, the gap has narrowed since 2011 because of the rising prices of a typical first-time buyer house.
The size of deposit that is often needed is often a major barrier to overcome before the potential financial advantages of home ownership become clearer. Whilst deposits can raise the upfront cost of buying, it is also an important and attractive form of longer-term savings for homeowners, and with rising house prices, it helps contribute towards higher housing wealth.
While prices are at an elevated level, the number of first-time buyers getting on the housing ladder continues to rise and this group now accounts for half of all new home purchase financed by a mortgage. Improving economic conditions, lower rates and government schemes such as Help to Buy, have played a key part in helping first-time buyers.”