High mortgage rates close gap between buying and renting costs - Halifax

The gap between the costs of home ownership and renting has reached its smallest level since 2019, according to the latest Halifax Owning vs Renting Review.

The latest Owning vs Renting Review from Halifax found the typical monthly cost to first-time buyers of owning a UK home is now £1,231, £27 lower than renting an equivalent property.

The analysis, based on the housing costs associated with a mortgage on a three-bed home compared to the average monthly rent of the same property type, found that monthly rental costs in 2023 grew by 24% to £1,258, while home-owning costs grew by 27% to £1,231.

However, on a regional basis, the monthly cost of owning a first home compared to the equivalent rental cost, was higher in nine out 12 UK regions or nations last year.

Renters are making the biggest savings compared with first-time buyers in the East of England, where they are an average £2,325 better off each year.

Renting in the South East (£1,859), East Midlands (£1,741) and Yorkshire & the Humber (£1,731) also saw significant yearly savings when compared to owning a first home.

The South West, London and Scotland are the only regions or nations where owning a first home is cheaper than renting. The largest annual savings are in the South West where owners are £1,663 better off.

Kim Kinnaird, mortgages director at Halifax, said: “Our latest analysis shows that, in nearly all regions across the UK, first-time buyers are better off renting than owning a similar home. In fact, the only regions where it’s cheaper to own rather than rent, are the South West, London and Scotland.

“We know home ownership can offer long term financial and living stability and that's why we believe it’s an important step to take. 

“Our customers want to create a secure future, so it's a big priority for us to help people get there. However, elevated borrowing costs, alongside a lack of available homes to buy, is pushing ownership further out of reach for would-be first-time buyers in many parts of the country. 

“This is why we’re major participants and big supporters of the Government’s affordable home ownership schemes, such as shared ownership and the mortgage guarantee scheme and we're committed to helping first-time buyers fulfil their dreams of having a place to call their own.”

Commenting on the research, Tom Bill, head of UK residential research at Knight Frank, said: “There has been no cliff-edge moment for house prices despite borrowing costs rising sharply over the last two years. 

“The prevalence of fixed-rate mortgages means any financial pain is entering the system in a staggered way. Lenders are also in a much stronger position than during the financial crisis, which means no wave of foreclosures to drive down prices. While the strong labour market is one reason inflation has remained stubbornly high, it has also underpinned buyer demand.

“The story of the last two years has been a slowdown in transactions not prices, which has made renting a cheaper option in some areas, even though the lettings market has suffered from a lack of supply. Given that housing will be one of the issues taking centre-stage at the election, it would be surprising if the Government failed to offer any help to first-time buyers.”