Is it cheaper to own or rent a home?

Homeowners tend to be more than lb800 annually best than renters, based on a brand new report.

Research by Halifax found that the space on price between owning and renting a house has grown by 8% during the pandemic, led by low home loan rates and rising rental costs.

Here, Which? explains how much better off homeowners are in your region while offering advice on how to get on to the property ladder.

Renters pay lb68 per month more than homeowners

Halifax’s Buying vs Renting Review analysed the expense of having a property in contrast to renting one.

It discovered that the price of renting has grown by 10% in the past year. In the same period, the price of owning a property (taking into account mortgage repayments, maintenance and insurance costs) increased by just 1%.

The bank says the gap in costs between buying and renting only agreed to be lb4 a month (lb48 a year) in December 2021, but rose to lb68 per month (lb816 a year) by December 2021.

How costs vary around the UK

lb800 annually may appear just like a lot, but the gap on price is much bigger in some parts of the UK.

Expensive rents working in london and also the South East mean homeowners are a lot of money a year better off than renters, as shown in the table below.

At the alternative end of the scale are the East Midlands, Yorkshire & The Humber and Northern Ireland, where the gap is under lb1,000.

Average deposit rises 11% throughout the pandemic

Halifax’s report shows how having a property can be a much cheaper option, but for many prospective buyers, the prospect of home ownership remains a distant dream.

Rising house prices and the absence of low-deposit mortgages since the start of pandemic mean many would-be buyers have been not able to save a big enough deposit.

Halifax says the average deposit put down with a first-time buyer in the UK is now lb58,986, a rise of nearly 11% in the space of a year.

Buyers in Northern Ireland pay the smallest deposits (lb30,150) while those in London pay the biggest (lb132,685).

Will the return of low-deposit mortgages help first-time buyers?

Halifax says first-time buyers put down a deposit averaging 23% of a property’s purchase price, but it’s easy to get on to the ladder having a smaller sum.

Historically, buyers might get a home loan with a 5% deposit, however the Covid-19 outbreak saw the vast majority of low-deposit mortgages withdrawn, meaning most first-time buyers needed a 15% deposit.

The good news is this fact is now changing. 90% mortgages have made a comeback previously few months, and the government’s new mortgage guarantee scheme (which launches on 19 April) might be a game-changer for first-time buyers.

The new scheme will encourage lenders to offer thousands of new 95% mortgages, and some from the UK’s biggest banks have already registered.

How much deposit will I need to purchase a home?

We’ve analysed data in the Land Registry to locate how much you might need to put down to buy a home inside your region.

The table below shows the total amount you’ll need for a 5%, 10% and 15% deposit in each region, in line with the average price paid by first-time buyers in January 2021.

Is it easier to save a bigger deposit?

The mortgage guarantee scheme should make it easier to get a 95% deal, but in short term, minute rates are likely to be high.

Let’s take 90% mortgages as an example. The best rates on two and five-year fixed term deals remain 3% and three.3% respectively, that’s about 1.2% a lot more than prior to the pandemic.

When the brand new scheme begins, we ought to see a flurry of new 95% deals appear, but it’s unlikely this can immediately lead to reduced rates.

These mortgages might make all the difference for first-time buyers with small deposits, but if place down more than 5%, you’ll be able to get a much lower rate, cutting the price of your monthly repayments and the interest you’ll pay.

Additional costs of purchasing a home

Halifax’s research analysed the comparative price of proudly owning and renting, but it didn’t element in the one-off costs of purchasing a property.

The current stamp duty break means you could save thousands when buying in England, Wales and Northern Ireland, but you’ll have to pay some other fees, too.

These may include mortgage arrangement fees, house survey and conveyancing fees, as well as the cost of removals.

You can find out more within our full guide around the price of purchasing a house.