Mortgages cost less than renting
Tuesday, 30 August 2011 12:21 PM
The cost of paying a mortgage for first-time buyers is more than £100 a month lower than renting, claims new research out today.
According to Halifax’s latest Buying vs. Renting Review, the average monthly costs associated with a first-time buyer taking ownership of a two-bedroom flat totaled £567 in July.
The review said this figure was 16 per cent (£110) lower than the typical rent paid on the same property type (£677 a month), contrasting with 2008 when the average cost of buying was in fact 29 per cent (£212) more than the average rent paid.
The decline in buying costs for first-time buyers has been driven by the fall in mortgage rates and house prices since 2008, the study said.
The average mortgage rate for a new borrower now stands at 3.84 per cent: a fall of 207 basis points from an average of 5.91 per cent in mid 2008. The average house price for a first-time buyer has fallen by 14 per cent to £124,378 over the same period.
First-time buyers put down an average deposit of £27,127 in July 2011, equivalent to 20 per cent of the average property price. This is nonetheless six per cent lower than the average of £28,751 in July 2008, revealing a small improvement over the period.
Despite the improvement in the affordability of buying relative to renting, figures from the Council of Mortgage Lenders show that there were 84,000 first-time buyers in the first half of 2011, 23 per cent fewer than in the same period in 2008.
This partly reflects the economic turbulence over the period, the review said, and the size of the average deposit still required to get on the property ladder.
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