Owning your own home is cheaper than renting by up to 18% each month plus the opportunity for equity if house prices rise.
The cost of renting exceeds that of owning a property and homeowners can be as much as 18% better off per month according to Halifax Buying vs Renting Review.
Based on a three-bed home with a mortgage, homeowners in London are saving 18% or £3,727 per year by buying their own home with the South East on 17% or £2,475 and Scotland 16% or £1,796.
This is a big incentive for first time buyers to get on the property ladder as the savings in London over ten years could be on average £37,270 and if house prices rise, gains in equity over time are possible.
Buyers everywhere can save
Wherever you live in the UK you can save on costs if you buy a home compared to renting by over 10% with the exception of Yorkshire & Humber which is only 3%.
The following table from Halifax compares the monthly costs of buying to that of renting and the percentage savings you can make to December 2019.
| Region | Buying | Renting |
Saving |
|---|---|---|---|
| Greater London | £1,378 | £1,689 | -18% |
| South East | £1,008 | £1,214 | -17% |
| South West | £765 | £915 | -16% |
| East Anglia | £736 | £853 | -14% |
| Scotland | £545 | £647 | -16% |
| Wales | £536 | £634 | -15% |
| North West | £568 | £665 | -15% |
| West Midlands | £621 | £711 | -13% |
| East Midlands | £620 | £686 | -10% |
| North | £468 | £530 | -12% |
| Northern Ireland | £437 | £489 | -11% |
| Yorkshire & Humber | £544 | £564 | -3% |
Londoners can make the biggest annual savings from home ownership of £3,727 with the South East saving £2,475, the South West £1,796 and Eat Anglia £1,400.
These savings are important for home movers wanting to trade up as their next property is likely to be more expensive and they will need a larger deposit or mortgage which would be based on affordability.
The higher rental costs is the reason why buy-to-let investors enter the market giving them the potential for rental income net of mortgage payments and equity gains in the future.
Russell Galley, Managing Director of Halifax said, the gap between home buying and renting is at its smallest margin for 10 years, but this masks some significant regional variations where homeowners are making savings on monthly costs.
Buying costs are increasing
Over the past ten years house prices have increased and the cost of buying a property is 26% or £1,800 per annum year compared to the cost of renting up 33% or £2,232 per year.
Strong house price growth is driving up the average mortgage payments as well as the average deposit and many first time buyers may need help from family and friends.
Help with the deposit for a new home can come from equity release buyers accessing cash using a lifetime mortgage and gift to a child or grandchild.
Apart from savings homeowners can make compared to renting, they can also benefit from the rise in property values and according to Zoopla over the last decade these are 54% higher for the leading cities.
The average house price growth for the top twenty cities is 54% or £90,187 with values averaging £257,200 while in London the rise is higher at 74% or £203,712 with property values at £479,00.
These equity gains mean the remortgage buyers have the opportunity to release capital which they can use to improve their home by adding a new kitchen or an extension.
What are your next steps?
Talk to our London City Mortgage brokers for advice if you remortgage your existing home and want the best mortgage deal or release capital, buying your first home, moving home or a buy-to-let investor.
Learn more by using the equity release calculator, mortgage cost calculators, and property value tracker chart. Start with a free mortgage quote or call us and we can take your details.
For older homeowners releasing equity from your property, our LCM mortgage advisers can recommend the lifetime mortgage, accessing wealth to maintain your lifestyle or repay an interest only mortgage.
