Buyers 10% better off than renters

New research from Lloyds Bank indicates that those getting a foot on the property ladder are better off than those renting.

According to the data, first-time buyers are £865 per year more wealthy than tenants in the rental market.

Costly

The average monthly buying fees, inclusive of mortgage payments, attributed to first-time buyers purchasing a three-bedroom property stood at £672 in December 2015. This was £72 lower than the average monthly rent of £744 paid by renters in the same type of property.

This shows an increase of £105 over the course of the last year. Average monthly rents have risen more sharply, showing a 3% increase, in comparison to a 2% rise in monthly buying costs.

At present, the financial gap between buying and renting (£865) is more than double the saving of £397 recorded in 2010. In this period, average rents have gone up by 23% (£139) per month from £605 and buying costs have risen by 17% (£100 per month) from £572,

Since 2009, buying has been the cheaper option.

Regional variations

Average monthly buying costs in the South East (£965) are £65 greater than the average rental costs in the UK. This is the only region in Britain where renting is the more cost effective option.

Alternatively, buying is more affordable than renting in monetary terms in the North West, where the average first-time buyer pays £133 per month less than the average renter. This was followed by Scotland, where owner-occupiers pay £120 less and Wales, where buyers enjoy savings of £103.

Buyers 10% better off than renters

First-timers

First-time buyer numbers hit 310,000 in 2015, slightly down from the 311,700 recorded in 2014. However, this is a rise of 60% since first-time buyer totals fell to a low of 193,700 in 2011.

The number of first-time buyers made up 46% of house purchase made with a mortgage during 2015. This was up from 36% at the beginning of the downturn in 2007.

Mike Songer, Mortgage Director at Lloyds Bank, observed, ‘we’ve seen a significant shift over the past five year, with people consistently paying less on average per month when owning their property as opposed to renting. In 2015 this gap widened by over £100 to an annual saving of £865.’[1]

‘This has been helped by record low mortgage rates and rising private rents, making owning a home a much more attractive proposition than renting. This steady improvement in the costs of buying compared to renting has helped to boost the number of first-time buyers over the past few years, who now account for 46% of all home sales in 2015-up from 36% in 2006. Official government schemes, such as Help to Buy have also played a part in helping first-time buyers as have improving economic conditions,’ Songer added.[1]