First-time buyers save £670 a year on rent

Mortgage rates have been falling which is cutting monthly costs

Updated: 

First-time buyers save £670 a year on rent

First-time buyers save £670 a year paying for their home compared with the cost of renting but the gap is narrowing, new figures show.

Data from lender Halifax showed that in June this year the average monthly cost of a three-bedroom home for these buyers was around £666 compared with £722 for renting the same type of property - a monthly difference of about £56.

Recent years have seen mortgage rates falling, cutting monthly costs for first-time buyers at a time when rents have been rising.

But the gap over the last year has narrowed amid house price rises.

In June 2009, the average cost of buying was £1,154 higher per year than renting.

Since then, the average price paid by first-time buyers for a three-bedroom house has risen by 25%. But monthly costs have come down as the average mortgage rate has fallen from 4.92% to 2.91%.

Average rents have risen by 23% in the same period, Halifax said.

In June 2014, monthly costs for first-time buyers were £1,018 cheaper per year - or £85 a month - than for those renting. Both have since risen but the 8% rise in the value of a typical home means the gap has now shrunk.

Monthly mortgage costs have gone up by £40 over the year though rents have risen by just £8, the figures showed.

In London, first-time buyers save £973 a year compared with renting but in one region, the South East, renting is the cheaper option by £98 - largely because of house price rises.

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