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Buyers are better off than renters, but the gap is narrowing

By Anna Bibby, 06 March 2019

The gap between annual costs of buying and renting is smaller than it has been in nearly a decade but, with all costs considered, buyers are still better off nationwide. Recent figures have shown that buyers are saving £366 in 2018, compared to 2017, where they were saving £900.

Research done by Halifax pointed out that the gap between buying and renting is down by 59%, the lowest in nine years. When comparing the costs of buying and renting of a three-bedroom home in the UK, the bank found that renters were spending £30 more per calendar month, compared to taking a mortgage out.

According to the managing director of Halifax, Russell Galley, this is largely due to the reduction in deposits for first time buyers and the large variety of products available for borrowers.

“The gap between buying and renting is narrowing, primarily driven by reduced first time buyer prices in some regions and continuing house prices growth, meaning that buyers are paying more on their mortgage,” said Galley.

“With more products available for borrowers, these combined factors have pushed up the price of buying quicker than the price of renting. Meanwhile, the cost of rent, household maintenance and average deposits have remained flat.”

The report also suggests that, although buying in recent years means fewer monthly costs than renting, there is an uneven snakes and ladder effect throughout the UK.

London buyers are making the biggest saving at 21%, which amounts to £4,475 a year compared to renting. Scotland has the highest saving outside of London, where they save 20% a year. In contrast, Yorkshire buyers are only saving 3% compared to renting.

The lender also advised that borrowers opting for buy to let mortgages have slowed down and it is actually first time buyers that are now driving up the number of homes being purchased through a mortgage, where they now account for just over half of all properties funded by a mortgage.

The total number of properties purchased by first time buyers has increased by 2% in the past year, continuing a seven-year upwards trend.

Remortgages have also seen a rise, reflecting the recent changes impacting landlords including the recent additional charge to stamp duty for new buy to lets and removal of mortgage interest tax relief.

However, Halifax also predicted that there will be a shortage of homes for sale with the current state of political uncertainty, but we weren’t going to see any significant change in house prices in either direction, although this was dependent on the outcome of Brexit.

Galley also stated that our withdrawal from the EU could potentially affect the cost of a mortgage.

“Looking ahead, aside from the obvious political and economic uncertainty, the biggest issue for the housing market in 2019 will be the degree to which the mortgage affordability changes”.

With a lot of people weighing up the pros and cons of both renting and buying, the biggest challenge for the property market going forward will be to address the affordability issues for both tenants and first time buyers.

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