- Average first-time buyers could save over £2,250 a year once on the property ladder compared to renting
- Londoners could make the biggest saving, as the average monthly rent is £289 higher than monthly mortgage payments
- Smallest differential between rent and mortgage payments is in the East of England at just £43 per month
Potential first-time buyers would have lower monthly outgoings if they bought a property rather than renting one, reveals new research from Santander Mortgages1. In every region of the UK, average monthly rental prices surpass average mortgage repayments.
The research shows that homeowners could save £2,268 a year if they were able to purchase a property rather than rent. The average monthly rent in the UK is currently £912 per household, compared to monthly repayments of £723 for the average first-time buyer household. Homeowners could save an average of £189 a month or £2,268 a year compared to renters.
Miguel Sard, Managing Director of Mortgages at Santander UK said: “Many first-time buyers understandably focus on the challenge of saving for a deposit and wonder how they will afford a property. However, it is often assumed that when you purchase a property you will be under greater financial pressure and our research shows the reverse is true.
“Of course, buying a property is a major financial investment with upfront costs to consider, but long-term the financial benefits can be significant. With annual savings averaging well over £2,000, this can really mount up over time and of course once the mortgage is paid off you have a valuable asset to show for it. Getting independent advice and looking for competitive rates, is crucial to get the right mortgage to meet potential homeowners individual needs.”
With the average first-time buyer deposit being £51,9052, hopeful buyers are opting for alternative methods of saving. One in five (22 per cent) of those wanting to buy would consider selling shares in the property, offering a potential capital return when the property is sold, 38 per cent would consider moving back in with their parents while saving for a deposit and 21 per cent said they will give up alcohol to raise the funds. Other financial products UK adults looking to buy could use to help them get on the property ladder include Santander’s Regular eSaver3 account which pays up to five per-cent interest, or government funded plans such as Help to Buy and the Starter Home scheme.
Historically, renting has appeared cheaper, especially in areas like London and the South East, where property prices have consistently been high. But since 2010, where the economy saw a re-set, the UK has seen inflation fall and with it mortgage rates have come down significantly, meanwhile rents have steadily crept up.
Prospective first-time buyers in London are set to make the biggest monthly savings by making the switch from renting to property ownership, as average rents exceed mortgage payments by over £289 a month or £3,468 a year. First-time buyers in Northern Ireland would see themselves £178 better off per month. At the other end of the scale are those living in the East of England, where typical first-time buyer monthly mortgage payments exceed average rents by only £43.
Table one: Comparison of average rental and mortgage costs by region4
| UK region | Average rent | Average FTB house price | Average FTB deposit | Average monthly FTB mortgage repayment | Amount better off buying (per month) | Amount better off buying (per year) |
|---|---|---|---|---|---|---|
| London | £1,569 | £420,500 | £134,660 | £1,280 | £289 | £3,468 |
| Northern Ireland | £629 | £131,076 | £30,435 | £451 | £178 | £2,136 |
| North West | £689 | £149,816 | £29,877 | £537 | £152 | £1,824 |
| Scotland | £644 | £142,329 | £28,311 | £510 | £134 | £1,608 |
| Yorkshire and The Humber | £623 | £143,810 | £27,527 | £521 | £102 | £1,224 |
| West Midlands | £679 | £168,287 | £35,207 | £596 | £83 | £996 |
| South West | £799 | £212,062 | £50,514 | £723 | £76 | £912 |
| South East | £998 | £276,807 | £67,866 | £935 | £63 | £756 |
| Wales | £596 | £146,557 | £27,135 | £535 | £61 | £732 |
| North East | £509 | £123,189 | £22,712 | £450 | £59 | £708 |
| East Midlands | £622 | £161,682 | £32,816 | £577 | £45 | £540 |
| East of England | £622 | £252,158 | £59,553 | £862 | £43 | £516 |
| United Kingdom | £912 | £213,462 | £51,905 | £723 | £189 | £2,268 |
Source: Santander Mortgages, 2018
For more information on Santander’s mortgages and other products please visit: www.santander.co.uk/mortgages
- Ends -
The information contained in our press releases is intended solely for journalists and should not be used by consumers to make financial decisions.
Notes to Editors:
1. Desk research conducted in May 2018 using the following sources:
a. Average rent https://homelet.co.uk/homelet-rental-index
b. Average house Price https://www.gov.uk/government/statistics/uk-house-price-index-summary-march-2018
c. Mortgage repayment calculator https://www.moneysavingexpert.com/mortgages/mortgage-rate-calculator
d. Traditional mortgage repayment term http://www.cml.org.uk/consumers/about-mortgages/mortgages-to-buy-a-home/
e. FTB house price and deposits data https://www.ons.gov.uk/economy/inflationandpriceindices/datasets/housepriceindexmonthlyquarterlytables1to19
f. Mean annual salary https://www.ons.gov.uk/employmentandlabourmarket/peopleinwork/earningsandworkinghours/datasets/placeofresidencebylocalauthorityashetable8
2. Based on average mortgage rate of 2.48%
3. The account offers 3% AER/gross (fixed) for 12 months, or 5% AER/gross (fixed) for 12 months if the account holder is a 1|2|3 World or Santander Select customer
4. Based on LTV of 76% (based on average FTB deposit listed above) no fees, repayment mortgage
Santander UK is a financial services provider in the UK that offers a wide range of personal and commercial financial products and services. It has brought real competition to the UK, through its innovative products for retail customers and relationship banking model for UK SMEs. At 31 March 2018, the bank has c19,500 employees. It serves around 14 million active customers, via a nationwide branch network, telephone, mobile and online banking; and 64 regional Corporate Business Centres. Santander UK is subject to the full supervision of the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) in the UK. Santander UK plc customers are protected by the Financial Services Compensation Scheme (FSCS) in the UK.
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