Monthly mortgage payments are cheaper than rental costs in most of the country’s major cities outside London, according to Lloyds Bank.
New research published on 10 October from Lloyds Bank shows that buying is cheaper than renting in many major cities outside of the capital. In other words, monthly mortgage payments are cheaper than monthly rent. These figures are based on a first-time buyer mortgage with a small 5% deposit. Lloyds says that British first-time buyer mortgage payments are typically 17% cheaper than renting.
The lender’s analysis compared monthly rental costs with typical first-time buyer mortgage payments in 11 cities across the country. In nine out of those 11 cities, being a homeowner worked out cheaper than paying rent every month.
The highest saving was in Glasgow, where monthly mortgage payments averaged £855 per month with a 5% deposit compared to an average monthly rent of £1251. This was based on an average property price of £172,000.
Next up was Newcastle, where first-time buyers could pay 20% less with a mortgage of £895 per month compared to rental costs of £1112 (on an average property price of £180,000). This was followed by Edinburgh (where the average price is £243,000), which saves first-time buyers over 13% per month, with £1208 per month in mortgage payments compared to a monthly rent of £1392.
On average across the UK, monthly mortgage payments are £1135 compared to monthly rental costs of £1360.
Is now a good time to buy your first home?
If you’re in a stable earning position and you feel ready to settle down, then buying a property may be a good option if you have saved a sufficient deposit.
‘We know that saving for a deposit is one of the biggest hurdles for first-time buyers,’ says Amanda Bryden, Head of Mortgages at Lloyds. ‘With rents having risen sharply over the last two years, many are already managing monthly payments that are higher than a typical mortgage.’
While home ownership is not for everyone and depends on individual circumstances, if you’re in a stable job with a regular income, it could be well worth considering. ‘Low-deposit mortgages could be the right solution for many – helping people move from renting to owning sooner than they thought possible,’ adds Bryden.
Be aware of up-front moving costs
Even with the costs associated with moving, it could still be worthwhile, so long as you’re well-informed and can budget accordingly. ‘It’s important to consider up-front costs like legal fees and moving expenses – but for most, the long-term savings will outweigh these,’ says Bryden.
Buying a property puts you in a more secure position and helps to build financial stability. Lloyds Bank estimates that, over five years, a buyer with a 5% deposit could reduce their loan-to-value ratio from 95% to 87%, even if property prices remain unchanged.