Low interest rates leave FTBs ‘better off’ than renters

Low interest rates leave FTBs ‘better off’ than renters
Credit: Joe Giddens/PA Wire

First-time buyers are better off than renters due to low interest rates, despite increases in the average deposit and mortgage payment, according to Halifax.

Data from the bank’s buying vs renting review found the gap between the cost of buying and renting had increased by 8 per cent in the past 12 months.

Monthly rental costs have increased by 10 per cent to £821 in the past year, while monthly buying costs increased by 1 per cent to £753 during the same period.

The review is based on the average cost to buy a three-bedroom property with a mortgage, including costs such as for household maintenance and insurance, compared to the average monthly rent for the same type of property.

According to Halifax, the average deposit put down by a first-time buyer rose by £11,677 since before the start of the pandemic (March 2020) to £58,986 and the average mortgage payment also increased.

But the bank added that low interest rates meant mortgage payments grew by less than rental payments, despite rises in the average deposit and mortgage payments.

Data from Moneyfacts shows the average two-year fixed rate at all LTVs was 2.57 per cent at the start of March 2021, up 0.14 percentage points year-on-year.

The equivalent five-year fixed rate, meanwhile, was broadly unchanged at 2.75 per cent, an increase of 0.01 percentage points.

Andrew Asaam, mortgages director at Halifax, said: “Lockdown restrictions may have held back renters planning to buy a property during the past year with its practical challenges, and while the stamp duty holiday race has helped drive record levels of mortgage approvals, the cost of renting has crept up in the same period.”

Asaam added: “Raising a deposit is still the biggest challenge for those looking to get on to the property ladder, but the average first home deposit has gone up by another £11,000 since the start of the pandemic.

“We know that first-time buyers will benefit from steps that make finding a deposit more of a reality and the new Help to Buy mortgage guarantee scheme could be a gamechanger for those saving hard to take the first step and often paying rent at the same time. We have also committed to lending £10bn in 2021 to help people buy their first home this year.”

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