Some people dream of home ownership, whilst some prefer the flexibility of renting. However, for a lot of families, there is no choice. The housing price boom, increased deposit expectations and more cautious borrowing mean that renting is the only option. But, if you have the choice, is it cheaper to rent or buy in the UK in 2023?
A recent study by a major bank crunched the figures and can give you an insight into what you can expect to pay for both a mortgage and rent. Read on to find out what the report uncovered.
Is it cheaper to rent or buy?
The cost of a mortgage on a first home is typically around £42 per month cheaper than renting, but the difference has reduced in recent years. And, in some parts of the UK, renting may be the less expensive option according to the analysis.
First-time buyers could typically pay around £971 per month for a three-bedroom home, while renters would potentially fork out around £1,013. This is according to calculations by Halifax.
The difference of around £500 per year between buying and renting is down from a peak reached in 2016. Back then, owners saved £1,567 annually on average.
In 2021, buying a home was found to be around £1,300 per year cheaper than renting.
How the study worked
The answer to ‘is it cheaper to rent or buy?’ is not as straightforward as just comparing rental costs with mortgage payments. The bank also factored in household maintenance, repairs, minor alterations and insurance costs for home-owners.
It used its own house price data, mortgage figures from UK Finance, as well as data from the Bank of England and the Office for National Statistics.
Researchers assumed buyers would put down different deposit sizes depending on where they were in the UK. But the average deposit size across the UK was 23%, or £64,598.
The biggest gap between buying and renting
The UK’s biggest gap between owners and renters, in percentage terms, was in Scotland. Those renting in Scotland pay an average £918 per month, compared with £727 for home-owners. That’s a saving of 21% for those on the property ladder.
In cash terms, those who had managed to get on the property ladder in London were nearly £3,000 a year better off than renters, according to the research. However, Halifax calculated that people in the capital needed a 32% or £188,663 deposit on average as first time buyers.
At the other end of the spectrum, first-time buyers in the North East need a £32,920 or 19% deposit on average.
Where is renting cheaper than buying?
The East of England was the only region where it was typically more expensive to buy a first home than rent one. Home-owners there pay £90 more each month, on average, than those renting.
Rising mortgage rates have been pushing up borrowers’ costs, but, as the housing market softens, there have been some indications of house prices coming down from their previous record highs.
Of course, making the move from renting to home-ownership can be difficult for many. Raising a sufficient deposit and then finding the right property can be a challenging process. Even with house prices expected to come down, it is tough to save for a deposit when rents are so high.
So, in answer to the question “is it cheaper to rent or buy in the UK in 2023?” it’s not quite as straightforward as you would think. Technically it is cheaper to buy a house, but being able to achieve that goal (if that is what you want) is no easy option.