Halifax: UK homebuyers almost £900 a year better off than people who rent despite recovery in house prices

Cheaper mortgages and lower house prices mean that UK homebuyers save £875 a year compared to those who rent, a new study has found.



The average monthly costs of buying a three-bedroom house stood at £672 in June 2013 - £73, or 10 per cent, cheaper than the costs of renting the same property, according to Halifax.



This is despite an ongoing recovery in house prices - that has, however, narrowed the gap between buying and renting in recent months compared to a year ago, when the difference stood at £78.

Housing market: Buying is now cheaper than renting as house prices have declined by 37 per cent since 2008

The scenario has changed considerably since 2008, when renting was £352 a month cheaper than buying, leaving renters £4,226 a year better off, according to Halifax.

But buying is now cheaper than renting as house prices have declined by 37 per cent since 2008. This follows the economic downturn and low mortgage rates pushed even lower over the last year by the Government's flagship Funding for Lending scheme to kick-start the housing market.

A mortgage price war broke out after the launch of Funding for Lending, which has given lenders access to cheap finance to help borrowers. The average mortgage rate for a new borrower has fallen from 5.88 per cent in June 2008 to 3.57 per cent by June this year.

Meanwhile, rental costs have been pushed higher by strong demand in the sector, as many renters have struggled to get on to the property ladder in the tough economy.



Comparison: In 2008, renters were £4,226 a year better off than homebuyers

A survey by LSL Property Services published yesterday found that rents across England and Wales hit their second highest level ever in August and were only £1 below the all-time high set in October last year. Monthly rents hit £743 across the two regions, up 0.7 per cent on July and 1.3 per cent higher than a year earlier.

Martin Ellis, housing economist at Halifax, said: ‘A combination of lower mortgage rates and declining house prices has substantially reduced the cost of buying over the past six years.



‘Nevertheless, the number of home buyers in the 12 months to June 2013 was nearly half of that in 2008, which will have been constrained by worries over job security.’



Regional differences: In cash terms, the average monthly cost of buying in London is £98 lower than renting

People living in London and Northern Ireland have the most to gain from buying rather than renting, the research suggested.



The gap in percentage terms is biggest in Northern Ireland, at 11 per cent. Buying in Northern Ireland costs £369 a month on average, while renting costs £415. In cash terms, the average monthly cost of buying in London is £98 lower than renting.



On the other hand, Wales and Yorkshire and the Humber were the only areas of the UK where renting was found to be more affordable than buying. In Scotland, buying was found to work out £27 a month cheaper than renting.

A recent survey by Halifax found that UK house prices have risen by 5 per cent over the last year, while official figures published last week showed average property values in the UK jumped 3.3 per cent compared with a year ago, with prices soaring 10 per cent in the capital.



The recent upturn in house prices has fuelled fears of another housing bubble, with borrowers over-stretching themselves.

These suggestions have been dismissed by Chancellor George Osborne and by mortgage lenders, both of whom have pointed out that transactions are still at relatively low levels.

Halifax based its calculations on its own database as well as official figures. For its home buyer calculation, it took into account mortgage payments for the average new borrower with a 25 per cent deposit as well as household repair costs and income lost by funding a deposit rather than having the money in savings.

