Buying cheaper than renting in the UK
Conditions are ripe for first time buyers in the UK to get on the property ladder as buying is cheaper than renting in every area except London, according to research.
The average first time buyer outside London could save £87 a month once on the property ladder and the average first time buyer mortgage payment is now £334 a month, the survey from Santander Mortgages shows.
According to the bank’s research, would be buyers currently renting outside of London could save themselves an average of £1,040 a year if they were able to own their own property. The average monthly rent in the UK outside London is currently just over £420 compared to monthly repayments of £334 for the average first time buyer, equating to an average saving for homeowners of £86 a month, it says.
Only those in the capital will be better off if they continue renting. Despite rental prices in London being roughly 56% higher than the average across the UK at £701 a month, exceptionally high house prices mean it would, on average, cost potential first time buyers an additional £359 a month to buy.
The research into typical first time buyer flats and terraced properties found the average price across the country to be £115,657. This means that a first time buyer applying for a 75% loan-to-value mortgage (the average LTV for first-time buyers according to the Council of Mortgage Lenders) would require a deposit of £28,914.
‘People have been justifiably cautious in approaching the housing market in recent months but this research strongly supports the idea that in the majority of cases owning can be less expensive than renting,’ said Phil Cliff, Director of Mortgage Marketing at Santander UK.
‘The now average LTV of 75% for first time buyers has provided an obstacle in some cases but saving for a deposit is clearly a wise move. Lenders are also looking to offer higher LTV products while the Government’s announcement that it will help boost the number of new homes is all positive news for those wishing to take their first steps on the property ladder,’ he explained.
He added that Santander is committed to encouraging first time buyers and it was the first lender to increase its maximum first time buyer LTVs on apartments and houses to 80 and 90% respectively.
The savings to be made through buying, as opposed to renting, have increased dramatically in the last six months, the research also shows. In October last year the average saving for those potential first time buyers able to buy was £52 a month. The climb in potential savings to £87 now represents an increase of 67%.
‘The first few months of 2010 have seen rents start to climb which has meant that the savings to be made for potential first time buyers have grown considerably. We hope the new Government honours the last’s pledge on stamp duty to continue support for the FTB market and help those considering getting on the housing ladder to buy rather than rent,’ said Cliff.
Prospective buyers in the North West are set to make the biggest savings if they can move from renting to owning a property, the research found. Average monthly rental payments in the region for typical first time buyers exceed mortgage payments by just over £141. Those in the North East and the East Midlands would save £119 and £100 respectively were they to buy.
Lower savings are available for those in the South West where typical first time buyer monthly mortgage payments exceed average rents by only £29.