The cost of buying a home is now almost a fifth lower than renting, according to Halifax.
Its latest research found the average monthly costs associated with buying a three bedroom house stood at £600 in June 2012; £132 (or 18%) lower than the typical monthly rent of £732 paid on the same property type.
Last year, the monthly cost associated with home buying was £78 (11%) lower than renting. Over the past 12 months, buying costs have fallen by 3%, while the cost of renting has risen by 5%.
In comparison, in 2008 average home buying costs (£1,048) were 45% (or £324) more than the average monthly rent paid (£724).
The substantial improvement in the affordability of buying relative to renting largely reflects a 43% drop in
The Halifax said that this situation was largely down to a fall in home buying costs since 2008; caused by a marked fall in both house prices and mortgage rates. The average mortgage rate for a new borrower has declined by more than two percentage points over the last four years from an average of 5.91% in June 2008 to 3.82% in June 2012. Over the same period, the typical UK house price has decreased by a tenth. In contrast, the typical rent paid has risen by 11% (£72) since 2010.
Monthly home buying costs currently account for 29% of average UK disposable income, down from 54% in 2008. Home buying costs in 2012 also account for a smaller proportion of average UK disposable income than rental payments (29% against 35%).
However, despite the improvement in affordability, the number of buyers in the UK housing market has fallen significantly over the last four years. There were 535,200 buyers (with a mortgage) in the 12 months to June 2012, 33% lower than the same period in 2008 (793,600).
“It is clearly encouraging that there has been a significant decline in the cost of buying a home for those able to enter the housing market since 2008,” said Martin Ellis, housing economist at Halifax.
“The improvement is due to a combination of lower mortgage rates and declining house prices. In contrast, market conditions for renters have deteriorated as rents have risen in the past two years.”
“Despite the improvement in buyer affordability, the housing market nationally continues to tread water. Those getting on the housing ladder still face challenges, most notably in getting a deposit, and this challenge, along with the considerable uncertainty regarding the economic outlook, is still contributing to subdued housing demand. However, it is worth noting that once homebuyers are on the first rung, their monthly costs are notably lower.”
