First-time buyers 'better off renting' in most UK regions: Halifax

The gap between the monthly cost of homeownership and renting has shrunk to its lowest level since 2019.

Related topics:  Finance,  Tenants,  FTBs
Property | Reporter
27th March 2024
a couple hugging, one holding a house key
"Our latest analysis shows that, in nearly all regions across the UK, first-time buyers are better off renting than owning a similar home. In fact, the only regions where it’s cheaper to own rather than rent, are the South West, London and Scotland"
- Kim Kinnaird - Halifax

Newly released market analysis by Halifax has revealed that the monthly cost to first-time buyers of owning a home is now £1,231 - just £27 lower than renting an equivalent property.

According to the data, this is the smallest gap between home ownership and renting recorded since 2019.

The analysis, based on the housing costs associated with a mortgage on a three-bed home compared to the average monthly rent of the same property type, found that monthly rental costs in 2023 grew by 24% to £1,258, while home-owning costs grew by 27% to £1,231.

On a nationwide level, first-time buyers are currently seeing annual savings of £319 compared to renting.

However, the monthly cost of owning a first home, compared to the equivalent rental cost, was higher in nine out of 12 UK regions or nations last year.

Renters are making the biggest savings compared to first-time buyers in the East of England, where they are an average of £2,325 better off each year.

Renting in the South East (£1,859), East Midlands (£1,741) and Yorkshire & the Humber (£1,731) also saw significant yearly savings when compared to owning a first home.

The South West, London and Scotland are the only regions or nations where owning a first home is cheaper than renting. The largest annual savings are in the South West, where owners £1,663 better off.

Kim Kinnaird, mortgages director at Halifax, said: “Our latest analysis shows that, in nearly all regions across the UK, first-time buyers are better off renting than owning a similar home. In fact, the only regions where it’s cheaper to own rather than rent, are the South West, London and Scotland.

“We know home ownership can offer long-term financial and living stability and that's why we believe it’s an important step to take. Our customers want to create a secure future, so it's a big priority for us to help people get there.

"However, elevated borrowing costs, alongside a lack of available homes to buy, is pushing ownership further out of reach for would-be first-time buyers in many parts of the country. This is why we’re major participants and big supporters of the Government’s affordable home ownership schemes, such as shared ownership and the mortgage guarantee scheme and we're committed to helping first-time buyers fulfil their dreams of having a place to call their own.”

Tom Bill, head of UK residential research at Knight Frank, commented: “There has been no cliff-edge moment for house prices despite borrowing costs rising sharply over the last two years. The prevalence of fixed-rate mortgages means any financial pain is entering the system in a staggered way.

"Lenders are also in a much stronger position than during the financial crisis, which means no wave of foreclosures to drive down prices. While the strong labour market is one reason inflation has remained stubbornly high, it has also underpinned buyer demand.

“The story of the last two years has been a slowdown in transactions not prices, which has made renting a cheaper option in some areas, even though the lettings market has suffered from a lack of supply. Given that housing will be one of the issues taking centre-stage at the election, it would be surprising if the government failed to offer any help to first-time buyers.”

Nathan Emerson, Propertymark CEO comments: "We are currently seeing upbeat news with regards to renting and buying homes, as highlighted by Propertymark’s most recent Housing Insight Report, which found that there has been a 29 per cent increase in rental properties coming to the market, and an 80% boost in new properties for sale. However overall, there is still much work that needs to be done to make housing more affordable across the entire UK.

“Rental costs have surged in recent years and various governments across the UK have a duty to support the creation of a sustainable mix of properties within the rental sector. Mortgage tax relief was scrapped in 2015 and this created a situation of landlords unwillingly being forced to pass increased overheads onwards to consumers.

"Rent caps in Scotland and Wales have also caused considerable issues and have ultimately contributed to sharp increases in rents for many too. We need to see the UK Government and the devolved administrations introduce tax incentives to bring landlords back to the market to increase rental supply.

“Attention needs to be paid to housebuilding targets and further support for first-time buyers. With inflation now nudging back down, Propertymark is extremely keen to see a reduction in interest rates as soon as possible to help uplift consumer confidence and affordability within the sales arena.”

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