Buying a Home is Still Cheaper than Renting on Average

Today, many people believe that they may never be able to purchase their own home, and that renting is a cheaper option. However, according to recent research by Halifax, home-buyers are actually financially better off than renters by an average of around £650 per year. At present, a three-bedroomed house would cost around £705 per month to purchase, but if you’re renting, you can expect to pay extra at around £760 for a typical monthly rent. But, the study also found that the gap between buying and renting has narrowed at around £19 per month over the past year.

What Does This Mean for Buyers?

If the gap continues to narrow at the same rate, then there is likely to be little difference between the cost of buying and renting a home in just under three years’ time. For potential home buyers, this will bring a breath of fresh air, as they can rest assured that renting whilst saving for their own home is not costing them any more than a mortgage would. However, for property investors, this could mean looking into investments elsewhere, as profits would be in decline. Buying a home also means that you will need to factor in the extra costs, for example transfer of equity quotes. You can check Compare Conveyancing Quotes here.

What Does This Mean for Renters?

If you expect to be renting your home, this means that although you are paying more than you would if you bought a property currently, if the gap continues to narrow, renters will be paying the same amount per month as those with a mortgage. Due to this, we could see a boom in more people buying their own home, as less properties could be available for rent if expected profit from property investment is low.

First Time Buyers Rising

Although it may seem that many people are choosing to rent rather than buy their own home, the number of first-time buyers has reached the highest level since 2007, before it dipped to an all-time low of just over 190,000 in 2008 during the financial crisis. In 2016, the figure reached almost 340,000, totalling over 300,000 for the third consecutive year, and up by 8% from the previous year.  

Associated Costs

When it comes to buying a home, however, it’s the associated costs that have risen rapidly over the years and made it difficult for potential first-time buyers to be successful. For example, the average deposit put down for a three-bedroom home in the UK is just over £30,000, but those looking to buy a home in London will need to put down a huge sum of over £100,000 to get on the property ladder. However, government schemes such as 'Help to Buy' have enabled many first time buyers to purchase their own home.

Although the gap is narrowing between the costs of buying and renting a home, purchasing a home is still the more financially attractive option and the number of first-time buyers is on the rise.