Buying cheaper than renting in London – for those who can afford it
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First time buyers in London are nearly £1,000 better off than if they were renting, according to a new report.
The Halifax Buying vs. Renting Review found that Londoners who bought property this year pay average monthly costs of £1,338, while the average monthly rental price is £1,419, representing a saving of £81 a month or £973 a year for new homeowners.
This is the biggest gap in the UK as a whole, where the average monthly costs associated with buying a three-bedroom house was £666, £56 lower than the typical rent for the same property type (£722 per month).
The figures show a significant reversal from the situation during the financial crisis in June 2009, when buying cost an average of £1,154 more than renting.
This switch in the relative costs of buying and renting is despite the average price of a first time buyer home increasing 25 per cent in the past six years and can be attributed to the proliferation of cheap mortgages in recent years.
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The average mortgage rate has fallen from 4.92 per cent in 2009 to 2.91 per cent this year, while average rents have grown by 23 per cent in the same period.
However, there were nine per cent fewer first time buyers in the first six months of this year compared with the same period in 2014, although the number is still significantly higher than at the height of the economic crisis.
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Craig McKinlay, Mortgage Director, Halifax said: “Looking at monthly costs, the combination of lower mortgage rates and declining rental value over the past six years has made it cheaper to buy than to rent.
“While numbers of first-time buyers getting on to the housing ladder in the first six months of both 2014 and 2015 has been over 135,000 – almost double the lows seen in 2009 – the issue of building more new homes in the right places needs to be addressed if we are to see sustainable growth.”