UK homeowners still better off than renters despite spike in interest rates | Housing market

Homeowners in the UK are almost £500 better off a year than renters, according to new research from Halifax.

The average monthly cost of owning a three-bed home for first-time buyers is now £971, which is £42 lower than the average cost of renting an equivalent property, the mortgage lender said. Renters pay on average £1,013 each month – 4% more.

This equates to a saving of almost £500 a year for owners. However, the gap has narrowed since 2016, when homeowners were saving £1,567 annually. The cost of mortgages has gone up as the Bank of England has raised interest rates 10 times since December 2021 to 4%.

“Our latest analysis shows that becoming a homeowner can bring significant savings for people,” said Kim Kinnaird, mortgages director at Halifax.

“While a predicted fall in house prices this year will be welcome news for those looking to buy their first home, it doesn’t change the fact that getting on the property ladder remains expensive – a problem that is compounded when rents are high, impacting the ability to save.”

The difference is most pronounced in London, where homeowners are paying nearly £3,000 less each year than those renting similar homes. In percentage terms, the biggest gap is in Scotland, where renters pay an average £918 a month compared with £727 for homeowners – a saving of 21% for those on the property ladder.

The east of England is the only region where it is cheaper to rent. Homeowners there pay £90 more each month, on average, than those renting.

While house prices have fallen in recent months, rents have gone up and are forecast to keep rising, driven by growing demand from tenants and a shortage of rental properties. Many smaller landlords are selling because of rising mortgage costs and tax changes.

Tom Bill, head of UK residential research at the estate agents Knight Frank, said: “To the frustration of tenants, rents are likely to stay higher for longer this year due to resilience of the sales market, which means more asking prices are being met and fewer owners are becoming landlords.

“On top of that, landlords are still exiting the sector due to tax changes in recent years and the prospect of more to come. Policies that attract landlords and are built on the principle that higher supply means lower rents would alleviate some of the pain for tenants.”

The latest first-time buyer data from Halifax shows that, in cash terms, deposits being raised in the north-east are the lowest in the UK at £32,920, about 19% of average property prices in the area.

Outside London – where those buying a first home raise an average deposit of £188,663 – properties in the south-east and east of England also require hefty deposits from new homeowners, at £97,320 and £87,157, respectively.