Over £130 a month cheaper to buy than rent in the UK

The cost of buying a home in the UK is now almost a fifth lower than renting, according to research by leading lender the Halifax.

The average monthly costs associated with buying a three bedroom house stood at £600 in June 2012, some £132 lower than the typical monthly rent of £732 paid on the same property type. In 2011, the monthly cost associated with home buying was £78 lower than renting. Over the past year, buying costs have dropped by 3%, while the cost of renting has increased by 5%. In contrast, in 2008 average home buying costs of £1,048 were 45%, or £324, more than the average monthly rent paid of £724. The substantial improvement in the affordability of buying relative to renting largely reflects a 43% drop in home buying costs since 2008, caused by a marked fall in both house prices and mortgage rates, says the Halifax. The average mortgage rate for a new borrower has declined by more than two percentage points over the last four years from an average of 5.91% in June 2008 to 3.82% in June 2012. Over the same period, the typical UK house price has decreased by a tenth. In contrast, the typical rent paid has risen by 11% or £72 since 2010. Monthly home buying costs currently account for less 29% of average UK disposable income, down from 54% in 2008. Home buying costs in 2012 also account for a smaller proportion of average UK disposable income than rental payments at 29% against 35%. Despite the improvement in affordability, the number of buyers in the UK housing market has fallen significantly over the last four years. There were 535,200 buyers with a mortgage in the twelve months to June 2012, some 33% lower than the same period in 2008 which was 793,600. The recent Halifax housing confidence survey showed that 58% said raising a deposit was the main barrier to buying a home while 56% said it was concerns about job security. ‘It is clearly encouraging that there has been a significant decline in the cost of buying a home for those able to enter the housing market since 2008. The improvement is due to a combination of lower mortgage rates and declining house prices. In contrast, market conditions for renters have deteriorated as rents have risen in the past two years,’ said Martin Ellis, housing economist at the Halifax. ‘Despite the improvement in buyer affordability, the housing market nationally continues to tread water. Those getting on the housing ladder still face challenges, most notably in getting a deposit, and this challenge, along with the considerable uncertainty regarding the economic outlook, is still contributing to subdued housing demand. However, it is worth noting that once homebuyers are on the first rung, their monthly costs are notably lower,’ he added. The research also found that in June 2012, buying a house was more affordable than renting in all 12 UK regions. In contrast, buying was more expensive than renting in all regions in June 2008. Buying is most affordable compared to renting in London with the typical homebuyer paying £177 a month less than the average renter, some £1,108 against £1,284. The disparity between buying and renting costs is smallest in the East Midlands with average monthly buying costs of £497 2% lower than average monthly rental costs of £505.