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Renting versus buying: which will cost you more?

First-time buyers pay deposits of more than £40,000

Renting versus buying: which will cost you more?

Buying a home often works out cheaper than renting – but high rent costs and huge deposit requirements are locking first-time buyers out of home ownership, according to data from the latest English Housing Survey.

The English Housing Survey is an annual government-backed study of households across England, covering everything from the private rented sector to housing for older people.

Here, we take a look at the key findings, weigh up the financial burden of buying and renting, and offer some advice on how you can buy your first home.


Rent costs £100 a month more than a mortgage

The survey data showed that, on a monthly basis, it costs more to rent a home than it does to pay a mortgage – around £100 a month extra on average.

In every age group, renters pay more than home owners – although the gap is significantly smaller for 35-44 year olds.

So what’s preventing renters from making the jump to home ownership? The biggest issue is saving enough money for a deposit. Between high outgoings on rent and low wage growth, many tenants struggle to build up their savings to the required level.

The survey shows that households with mortgages spend just 18% of their monthly income on housing costs, while renters spend almost double that (35%).

Average deposit climbs to £48,000

There are around 650,000 homes owned by first-time buyers in England, and plenty more aspiring homeowners are hoping to join them.

The survey shows that the average age of a first-time buyer in England was 32 in 2015-16 – up just a year from 2005-06 (31), and two years from 1995-96 (30).

So while it’s true that buyers are getting older, there isn’t a notable step change in the demographic of people buying their first home.

Still, affordability remains a major problem – with average deposits in England topping £48,000, or a remarkable £94,000 in London.

What can I do?

  • Choose the right time to apply for a mortgage – 70% of households who apply get approved, but sorting out your finances first is vital
  • Ask for some help from the Bank of Mum and Dad – 29% of first-time buyers are helped on to the ladder by family or friends
  • Consider buying with a partner or friend – 74% of buyers are couples, up from 66% in 2005.

Majority of renters aim for property ladder

Just under six in ten renters (59%) expect to buy a home at some point in the future – and just under a quarter intend to buy in the next two years.

Of those who don’t expect to buy, affordability remains the biggest barrier.

What is my best route in to home ownership?

The table below shows the different options available to aspiring homebuyers at different stages of saving to get their first property.

I want to buy in 1 year…
Ensure you’re ready to buy your first home and have budgeted for the costs of buying a house, and consider whether schemes such as Help to Buy or shared ownership could assist you. It’s not too late to make the most of a Help to Buy Isa bonus, so open one of these if you haven’t already. Look online or register with an estate agent to begin your search.
I want to buy in 2-3 years…
Aside from the Help to Buy and shared ownership schemes, you could benefit from the government’s upcoming Starter Homes Initiative, which will offer discounts to first-time buyers aged under 40. Think about how you can maximise your savings through a lifetime Isa, and start to get your credit report in order.
I want to buy in 5 years…
Consider opening a lifetime Isa, as this will give you the biggest bonus on your savings when you buy a house. Start to learn the basics of how to save for a mortgage deposit and get your head around how much deposit you’ll need for a mortgage – although bear in mind that property prices can change significantly over time.

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