Renting costs £1,400 more a year than buying

The financial benefits of owning rather than renting a property are well understood, but the difference between rent and mortgage costs might be larger than you thought.

According to new research from Halifax, the gap between rent and mortgage payments widened last year, with the average rent for a three-bed property costing £874 a month. In comparison, the average monthly mortgage cost for the same type of property was £759, a difference of 13% which over a year adds up to a whopping £1,378.

These figures are averages, with the gap between the costs fluctuating widely depending on where you live. For example, the annual difference between rent and mortgage costs in London is a hefty £4,181 while in Northern Ireland it’s only £205.

For many renters, these figures will come as no surprise and instead further highlight an all too familiar problem. While it’s clear they can afford the cost of a mortgage each month, the steep cost of renting often means that saving for a deposit to buy a home is difficult, if not impossible.

All hope is not lost, however, with many people managing to achieve their homeownership dreams. Esther Djikstra, Mortgages Director at Halifax, said: “Over the last year, we have seen record numbers of buyers entering the market, moving to bigger properties, and taking advantage of the Stamp Duty holiday. However, historic lows in interest rates have kept mortgage costs down, compared to rents.

“Still, before homebuyers can benefit from lower monthly costs, a deposit needs to be put together, still the greatest challenge for many first-time buyers. The £62,000 average deposit we see in our data may be an unimaginable sum to potential first-time buyers, but it’s much higher than many need to get a foot on their housing ladder. Deposits from 5% are available and, based on the average house price, mean putting down a £12,500 deposit – significantly less than the average.”

Although these figures might make some feel like homeownership is the only way to go, it’s not something that suits everyone. While renting is often the more expensive option in the short term, it offers a number of benefits that homeownership can’t. These include greater flexibility, few maintenance costs (if any), as these are the landlord’s responsibility, and the potential to live in a property in an area that is too expensive to buy in.

There are strong arguments for both sides and if you have been thinking about whether to rent or buy your next home, ultimately only you can decide which option is best for you. Our article Renting or Buying – which is right for you? has some more points you might want to think about.

If you’re currently looking for a home to buy, but aren’t sure whether you’ll be able to get a mortgage. you might want to consider getting professional advice.

Author: wpadmin

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