Research carried by mortgage lenders Halifax suggests that buying a house is now cheaper than renting. A study showed that renting is around 16 per cent more expensive than becoming a home owner, for example the average monthly cost of a three bedroom house in December was £600 for owners compared to £716 for tenants.
This represents a major turnaround in the property market; three years ago at the peak of the property bubble, mortgage payments were working out 29 per cent more expensive than renting, meaning that only the wealthiest few consider buying a home or other property.
These figures fit in nicely with other evidence suggesting that the market is becoming less hostile to first time buyers. The biggest barrier recently was the massive deposits required by lenders to secure a mortgage, these have crumbled since the beginning of 2012 as mortgage providers have started offering deals requiring only a 5 per cent deposit, something seldom seen since before the credit crunch.
Rock bottom interest rates and rises in the cost of renting have also combined to the benefit of first time buyers. Speaking to the Guardian, Ben Thompson, director of L&G Mortgage Club said: “a lot of people were priced out of the market between 2003 and 2007, when the bubble burst prices went down but many still couldn’t get a mortgage because of the deposit required, so there is huge pent up demand from potential first time buyers”.
Some of Halifax’s findings appear to be at odds with HSBC’s annual moving home survey, released this week, which states that the property market is still sluggish thanks to the younger generation’s inability to buy and the older generations unwillingness to sell. The fact that 2011 saw the lowest annual number of mortgage purchases since 1974 would seem to support this: Martin Ellis, housing economist at Halifax, said: “The average mortgage payment has fallen dramatically over recent years as a result of falling house prices and mortgage rates, however, the number of purchasers has continued to fall due to on-going challenges in raising a deposit and wider uncertainty for the prospects of the UK economy.”.