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New research reveals that owning a home is cheaper than renting in the UK

Aspiring first time buyers would have lower monthly outgoings if they bought a property rather than renting one as average monthly rental prices surpass average mortgage repayments in every region of the UK.

Average first time buyers could save over £2,250 a year once on the property ladder compared to renting, according to the research from Santander Mortgages. Those in London could make the biggest saving, as the average monthly rent is £289 higher than monthly mortgage payments.

The research also shows that the smallest differential between rent and mortgage payments is in the East of England at just £43 per month.

The average monthly rent in the UK is currently £912 per household, compared to monthly repayments of £723 for the average first time buyer household. Homeowners could save an average of £189 a month or £2,268 a year compared to renters.

‘Many first time buyers understandably focus on the challenge of saving for a deposit and wonder how they will afford a property. However, it is often assumed that when you purchase a property you will be under greater financial pressure and our research shows the reverse is true,’ said Miguel Sard, managing director of Mortgages at Santander UK.

‘Of course, buying a property is a major financial investment with upfront costs to consider, but long term the financial benefits can be significant. With annual savings averaging well over £2,000, this can really mount up over time and of course once the mortgage is paid off you have a valuable asset to show for it,’ he added.

With the average first time buyer deposit being £51,905, hopeful buyers are opting for alternative methods of saving, the research also found. Some 22% of those wanting to buy would consider selling shares in the property, offering a potential capital return when the property is sold.

Some 38% would consider moving back in with their parents while saving for a deposit and 21% said they will give up alcohol to raise the funds. Others could also look at the Government funded Help to Buy scheme and Starter Home scheme.

The report points out that historically, renting has appeared cheaper, especially in areas like London and the South East, where property prices have consistently been high. But since 2010, where the economy saw a re-set, the UK has seen inflation fall and with it mortgage rates have come down significantly, meanwhile rents have steadily crept up.

Prospective first time buyers in London are set to make the biggest monthly savings by making the switch from renting to property ownership, as average rents exceed mortgage payments by over £289 a month or £3,468 a year. First time buyers in Northern Ireland would see themselves £178 better off per month. At the other end of the scale are those living in the East of England, where typical first time buyer monthly mortgage payments exceed average rents by only £43.

Kevin Roberts, director of the Legal & General Mortgage Club, pointed out that saving go a deposit for a first home can still be a struggle. ‘Unlike renting, a home owners’ deposit and mortgage payments help build up equity, and the chance for a borrower to own their home outright. However, for many aspiring home owners, saving for this initial deposit is easier said than done, with many having to rely on the Bank of Mum and Dad,’ he said.

‘One of the challenges many would-be home owners face is putting enough money aside for a deposit, whilst balancing other monthly outgoings such as rent, bills, and recreational spending. With over 40% of income spent on rent, this is ultimately leading to some borrowers who may appear perfectly lendable to on paper, remaining in the private rental sector,’ he explained.

‘Building more affordable housing is certainly a step in the right direction, yet this isn’t enough. As an industry, we need to find other ways to help these borrowers move into home ownership. Whether that’s creating more intergenerational products, rethinking affordability criteria by tracking rental payments, or finding alternative methods for borrowers to save for a deposit. Whilst learning from the past, we need to provide these borrowers with the innovative products they need in today’s market,’ he added.