Home buyers are paying more for their mortgages closing the monthly cost gap with renting, but homeowners are still better off.
Continuing house price growth coupled with smaller first time buyer deposits has increased mortgage repayment costs according to the Halifax.
This has closed the gap with renting as in 2017 buyers saved £900 per year compared to renters and the latest figures show this has reduced 59%, its lowest in nine years, to £366.
The Halifax report for housing costs includes a mortgage on a three-bed home in the UK costing £729 per month in December 2018 whereas the monthly rent is £759 for the same property.
Buying cheaper than renting
After the financial crisis base rates were reduced from 5.5% in 2007 to a low of 0.5% in 2009, driving the cost of mortgage repayments down in the following years.
The following table from the Halifax shows average monthly costs in the UK for a mortgage compared to renting and the annual savings.
| Year | Mortgage |
Rent |
Annual Savings |
|---|---|---|---|
| Dec-08 | £871 | £616 | £3,060 |
| Dec-09 | £577 | £561 | £204 |
| Dec-10 | £575 | £605 | £360 |
| Dec-11 | £572 | £653 | £972 |
| Dec-12 | £588 | £661 | £888 |
| Dec-13 | £613 | £692 | £942 |
| Dec-14 | £658 | £720 | £741 |
| Dec-15 | £670 | £744 | £886 |
| Dec-16 | £707 | £759 | £623 |
| Dec-17 | £679 | £754 | £900 |
| Dec-18 | £729 | £759 | £366 |
The fall in the cost of borrowing has benefited first time buyers, home movers, remortgage buyers and buy-to-let investors with the rise in cheap mortgage deals.
The average monthly cost in the UK of owning was lower than renting saving homeowners £972 annually in 2011 and the gap has closed in 2018 to £366 annually.
Russell Galley Managing Director of Halifax said, the gap between buying and renting is narrowing, primarily driven by reduced first time buyer deposits in some regions and continuing house price growth.
This means buyers pay more on their mortgage and with more products available for borrowers, these factors combined have pushed up the price of buying quicker than the price of renting.
Meanwhile the cost of rent, household maintenance and average deposits have remained broadly flat, says Mr Galley.
For remortgage buyers at the end of your mortgage deal, avoid the lenders expensive variable rate and switch to a preferential rate to reduce your monthly repayment costs.
Biggest savings found in London
In London owning a property has the largest savings of 21% or -£4,475 per year where the cost of a mortgage is £1,390 per month compared to renting at £1,763 per month.
For the South East of England the savings of 14% or -£2,025 per year versus renting followed by Scotland with savings of 20% or -£1,574 and the North West 19% or -£1,556 in savings.
In contrast the financial gain in Yorkshire & and Humber is the lowest in the country with -£361 for the year or only 5% lower than renting.
The number of new buy-to-let mortgages have reduced for the fourth year to 66,400 due to the impact of additional stamp duty tax charge and the removal of mortgage interest tax relief impacting landlords.
In contrast, first time buyers are now driving the number of house purchases with a mortgage with numbers increasing to 370,000 in 2018.
Help for first time buyers can come from family members as the equity release mortgage buyer can access wealth and gift a bigger deposit to a child or grandchild on their first home to reduce monthly costs.
What are your next steps?
Call our LCM mortgage brokers for advice if you are a first time buyer, want to remortgage your existing home for the best mortgage deal, moving home or are a buy-to-let investor.
Learn more by using the property value tracker chart, mortgage costs calculator and equity release calculator. Start with a free mortgage quote or call us and we can take your details.
For equity release buyers our London City Mortgage advisers can recommend lifetime mortgages allowing you to receive cash from your property for home improvements, holidays or even give to a family member.
