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Average first-time buyers could save over £2,250 a year once on the property ladder

Potential first-time buyers would have lower monthly outgoings if they bought a home rather than renting one, according to new research from Santander Mortgages.

In every region of the UK, average monthly rental prices are greater than 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 £51,905, hopeful buyers are opting for alternative methods of saving. 22% of those wanting to buy would consider selling shares in the property, offering a potential capital return when the property is sold, 38% would consider moving back in with their parents while saving for a deposit and 21% said they will give up alcohol to raise the funds.

Historically, renting has appeared cheaper, especially in areas like London and the South East, where property prices have consistently been high. But since 2010, 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.

Kevin Roberts, director of Legal & General Mortgage Club, added: “Unlike renting, a homeowners’ deposit and mortgage payments help build up equity, and the chance for a borrower to own their home outright. However, for many aspiring homeowners, saving for this initial deposit is easier said than done, with many having to rely on the Bank of Mum and Dad.

“One of the challenges many would-be homeowners face is putting enough money aside for a deposit, whilst balancing other monthly outgoings such as rent, bills, and recreational spending. With over 40% of income spent on rent, this is ultimately leading to some borrowers who may appear perfectly lendable to on paper, remaining in the private rental sector.

“Building more affordable housing is certainly a step in the right direction – yet this isn’t enough. As an industry, we need to find other ways to help these borrowers move into homeownership; whether that’s creating more intergenerational products, rethinking affordability criteria by tracking rental payments, or finding alternative methods for borrowers to save for a deposit. Whilst learning from the past, we need to provide these borrowers with the innovative products they need in today’s market.”


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