According to new research from Santander, first-time buyers are paying less on mortgage repayments than rent.
The average monthly rent in the UK is currently £912, while monthly mortgage repayments are £723 (based on an average mortgage rate of 2.48%).
The deposit challenge
The research also shows that despite this fact, many who are looking to own a home are struggling to save for a deposit. With the typical deposit at around £50,000, an increasing number of young people are making big sacrifices to allow them to save. From moving back in with their parents, to giving up alcohol or even passing up on holidays for a few years. And for many young people, the Bank of Mum and Dad is their only route into home ownership.
Where rents are highest
Those living in the Capital make the biggest savings when buying a property compared to renting. The report reveals that the average monthly rent in the city is £289 higher than the average mortgage repayment. Conversely, in East of England, people see a little difference between the two, just £43 between them.
The economic benefit is clear, yet as Ishaan Malhi, the chief executive of Online Mortgage Broker Company explains, “It can be extremely difficult for anyone renting to get on the property ladder, especially in London where the average person spends virtually half of their net earnings on rent”.
Getting on the ladder
Ishaan believes there are ways to make it easier to get on the ‘property ladder. Sharing property ownership and respectively the deposit and mortgage repayments could be one way of doing it.
Once you’ve reached the position to look for mortgage deals, he advises buyers to use a broker rather than going directly to a lender. Using a broker will give a broader view of available products and increase the chances of saving money.
See the table below which compares London and the North West when it comes to rents versus mortgage repayments!
|Comparison of average rental and mortgage costs by region|
|UK region||Average rent||Average FTB house price||Average FTB deposit||Average monthly FTB mortgage repayment||Amount better off buying (per month)||Amount better off buying (per year)|