Choosing between buying and renting

For first-time buyers in the UK, the cost of ownership can be daunting. However, when you look at the long-term benefits, it is clear that being a homeowner pays off. The monthly cost of owning a home for first-time buyers is currently 4% lower than the cost of renting the equivalent property, according to new analysis[1].

The latest Owning vs Renting Review data shows the average monthly mortgage cost for a first-time buyer is £42 lower than the cost for renters. The analysis, which is based on housing costs for first-time buyers with a mortgage on a three-bed home compared to the average monthly rent of the same property type, found that the £971 owners are now paying compares to £1,013 for renters, each month.

GAP BETWEEN OWNERS AND RENTERS

While this equates to an estimated £504 saving per year for owners, the gap is down from its peak in 2016, when homeowners were saving £1,567 annually compared to renters. The UK’s greatest gap between owners and renters, in percentage terms, can be found in Scotland. Those renting in the nation are paying an average £918 per month, compared to £727 for homeowners – a saving of 21% for those on the property ladder.

BOTH RENTAL COSTS AND HOUSE PRICES IN THE UK ROSE:

• The average rental payment outside London is now at £1,126 a month (up 11.8% from the previous year)
• The average rental payment in London is now £2,257 a month (up 15.8% from the previous year).
• The average house price is £293,835 (up 9.9% from the previous year) – a monthly mortgage payment on this would be around £1,574, assuming you put down a 10% deposit with a 30-year term Month to month, and depending on where you live, renting can be the cheaper option.

MOVING FROM RENTING TO HOME OWNERSHIP

Making the move from renting to home ownership can be difficult for many, as raising a sufficient deposit and then finding the right property can be challenging. However, nationally homeowners are almost £500 better off than renters each year. While a fall in house prices this year will be welcome news for those looking to buy their first home, it doesn’t change the fact that getting on the property ladder remains expensive – a problem that is compounded when rents are high, impacting the ability to save.

“Making the move from renting to home ownership can be difficult for many, as raising a sufficient deposit and then finding the right property can be challenging. However, nationally homeowners are almost £500 better off than renters each year.”

MANAGING YOUR BUDGET BETTER

The process of saving for a house deposit can be daunting and overwhelming, especially for first-time buyers. However, there are ways to make the process easier and ensure that you reach your goal more quickly. One of the most important things is to create a budget plan. Start by calculating your monthly income and expenses, then work out what you can afford to save each month. Make sure you factor in unexpected expenses, as this will help you manage your budget better and make sure that your savings are not affected.

SET CLEAR GOALS AND CREATE A TIMELINE

It is also important to set clear goals for yourself and create a timeline for achieving them. Break down the total amount that you need to save into small manageable chunks and set milestones for each of them. This will help you keep track of your progress and stay motivated to continue saving. In addition, start looking for ways to save money wherever possible.

Look for opportunities to cut down on your monthly expenses, such as reducing utility bills or switching to a cheaper mobile plan. You can also look at other lifestyle changes, such as cutting back on eating out, going out for entertainment and cancelling unwanted subscriptions.

ACHIEVING YOUR DREAM FASTER

Finally, consider taking advantage of other options to increase your savings. Consider putting your money in a higher yielding account or look into government schemes that may offer tax incentives and help you save more. By following these tips and staying focused on your goal, you can make the process of saving for a house deposit much easier and get closer to achieving your dream faster.

Don’t forget, our professional friendly advisers are on hand to support you and can help you explore all of your options.

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