Low-cost loans mean owning your home is cheaper than renting

Home owners spend an average of £608 a month on mortgage payments and maintenance costs on a typical three-bedroom house, but rent on a similar property would cost £706 a month, researchers for the high street bank Halifax found.

The average mortgage rate for a new borrower has fallen from 5.82 per cent in March 2008 to 3.59 per cent last month, cutting monthly payments by about 39 per cent.

Halifax say the costs associated with owning a home account for 27 per cent of people’s take-home pay, down from 56 per cent three years ago.

However, tougher lending rules are still preventing many potential buyers from getting on the property ladder.

Suren Thiru, housing economist at Halifax, said: “The typical monthly mortgage payment has declined by over a third since 2008 as a consequence of falling mortgage rates and lower house prices.

“As such, the fall in the cost of buying a property compared to the average rent paid by tenants has been significant.”

It is now cheaper to buy a property than to rent one in 10 of the 12 regions of the UK, with people in London seeing the biggest savings, at £144 a month.

But it is still two per cent cheaper to rent than buy in Northern Ireland, while people in Wales would be one per cent better off if they rented rather than bought.

In the North West it is seven per cent cheaper to buy rather than rent, saving £33 a month, and four per cent cheaper in the north, including Yorkshire, and the South West and South East, according to the Halifax research.

The findings were recently borne out in Liverpool, where developers discovered that city centre rents were comfortably exceeding mortgage costs.

Pauline Sangster, residential sales and marketing manager for the St Paul’s Square development in the city’s commercial district, said: “Despite the fact that the costs of owning a property are at an all-time low, there is a widespread belief that it is more expensive. In fact, it can be far more cost-effective.”

Last month the property website Zoopla.co.uk discovered that people were financially better off buying a two-bedroom flat than renting one in 80 per cent of places.

The difference was greatest in Milton Keynes, where rent on a two-bedroom flat averages £785 a month, while a mortgage is £554.

But Nicholas Leeming, Zoopla’s business development director, said: “The impact of a possible rise in interest rates cannot be ignored.

“If interest rates were to increase by one per cent and rents were to remain the same, renting would become more cost-effective in 78 per cent of the locations studied.”