First-time buyers could end up typically paying around a fifth less in mortgage payments per month than if they were privately renting – provided they can stump up around £50,000 for a deposit – analysis suggests.
Zoopla calculated that the average first-time buyer mortgage payment could work out at £1,038 per month, which is around 20% lower than the average rent of £1,248 per month across Britain.
The analysis was based on people having a 20% deposit to put down.
This means first-time buyers would need to raise around £50,740 for a 20% deposit, based on average house prices.
An average 20% on a typical first-time buyer home ranges from £27,700 in the North East of England, to £83,440 in London.
Zoopla added that first-time buyers in London often tend to need a bigger percentage deposit, of around 30% of the property price, due to house prices typically being higher.
Looking across Britain, the East of England bucks the general trend of buying being cheaper than renting, Zoopla found.
The costs of buying versus renting are also very close across the South East and the East Midlands regions, while the biggest percentage gap between buying and renting is in the North East of England, the report said.
The analysis was based on several assumptions, including a 4.5% mortgage rate and a 30-year mortgage term.
In total, Zoopla analysed the cost of renting versus buying across 118 postal areas of Britain.
It said the cost of buying is typically more than 30% below rental costs in places including Glasgow, Edinburgh, Newcastle, Liverpool and Cardiff.
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By contrast, buying costs 15% more than renting typically in Harrogate, and 7% more in the Watford postal area, the research indicated.
In areas with higher house prices, where it is trickier to get on the property ladder, this has the knock-on effect of putting extra pressure on the rental market, with demand pushing rents higher, the report said.
The Financial Conduct Authority (FCA) recently said it is looking into simplifying mortgage rules, which could help home buyers to secure a property – and on Friday last week it promised “swift action to support people in getting the keys to their own home”.
Richard Donnell, executive director at Zoopla, said: “Our renting versus buying analysis is welcome news for would-be first-time buyers looking to buy their first home, having faced steep increases in rents over the last three years.
“There remain challenges facing first-time buyers, especially those on average incomes or with small deposits. Mortgage regulations introduced in 2015 to stop a housing market boom and bust have created a higher hurdle to home ownership for those on middle incomes, who can afford to make rental payments but are unable to prove they can afford higher mortgage ‘stress’ rates should borrowing costs increase in the future.
“The more first-time buyers priced out of home ownership, the greater the pressure on the private rental market and rental levels.
“Proposals to review regulations around mortgages are welcome. We do not want to return to the loose lending that preceded the global financial crisis.”
Mr Donnell suggested that a “modest loosening” in lending rules “would help more middle to higher-income renters access home ownership and ease some of the pressure in the rental market without causing a boom in house prices”.
Here are average first-time buyer property prices, according to Zoopla, followed by the typical cost of a 20% deposit, typical monthly mortgage payments, average monthly rents, and the difference between mortgage costs and rental costs in percentage terms:
– North East, £138,500, £27,700, £567, £748, minus 24%
– Yorkshire and the Humber, £161,900, £32,380, £663, £839, minus 21%
– North West, £176,900, £35,380, £724, £915, minus 21%
– Wales, £179,900, £35,980, £736, £929, minus 21%
– Scotland, £165,700, £33,140, £678, £835, minus 19%
– West Midlands, £207,700, £41,540, £850, £960, minus 11%
– South West, £250,700, £50,140, £1,026, £1,124, minus 9%
– London, £417,200, £83,440, £1,708, £1,822, minus 6%
– East Midlands, £217,800, £43,560, £891, £903, minus 1%
– South East, £332,800, £66,560, £1,362, £1,380, minus 1%
– East of England, £317,100, £63,420, £1,298, £1,228, plus 6%
