Monthly mortgage repayments are now cheaper than rent costs in all parts of the UK, so long as first time buyers can raise the deposits they need to get onto the property ladder, according to a report by Santander.
The bank claims that households could save an average of £2,268 per year through purchasing a home, rather than renting one.
Santander used recent rent price data, taking the average monthly cost of £912 per household, and compared it with monthly mortgage repayments of £723 for the typical first time buyer.
This gives homeowners an average saving of £189 per month, or £2,268 a year, compared with private tenants.
The bank’s research is based on Land Registry figures, which report an average first time buyer house price of £213,462. It also assumes a 76% loan-to-value (LTV) mortgage at 2.48%, with no fees.
The study includes a regional breakdown, indicating that the largest annual savings are in London, at an average of £3,468, while the smallest difference is in the East of England, at £516 per year.
Santander addressed the issue of how first time buyers would raise a deposit to buy their own homes, which it put at a staggering average of £51,905.
When asked how they would save such funds, 38% would move back in with their parents and 21% would give up alcohol to raise the deposit needed.
Miguel Sard, the Managing Director of Mortgages at Santander, comments on the findings: “Many first time buyers understandably focus on the challenge of saving for a deposit and wonder how they will afford a property. However, it is often assumed that, when you purchase a property, you will be under greater financial pressure, and our research shows the reverse is true.
“Of course, buying a property is a major financial investment with upfront costs to consider, but, long-term, the financial benefits can be significant.”
He adds: “With annual savings averaging well over £2,000, this can really mount up over time and, of course, once the mortgage is paid off, you have a valuable asset to show for it.”
Positively, the Santander research takes monthly mortgage repayments into account when calculating the difference between owning and renting a home. Another recent study by developer Strata looked only at deposits and fees when making its bold statement. Read more on the story here.