Buyers can save £100 a month

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The cost of buying a home for first-time buyers is more than £100 a month lower than renting, according to latest figures from Halifax.

But many young people who want to buy will draw little comfort from the news.

For the Halifax claims that the average deposit required to buy a home in July was £27,127, equivalent to 20 per cent of the average property price.

Based on average monthly running costs associated with living in a two-bedroom flat, Halifax says a first-time buyer could expect to pay £567 on a mortgage – or £677 to rent.

That’s a gap of £110 in favour of the buyer, and follows the fall in the average mortgage rate to a current 3.84 per cent .

By contrast, in summer 2008, the average cost of buying was 29 per cent (£212) more than the average rent paid and the average mortgage rate was 5.91 per cent.

Homes have also got significantly cheaper since mid-2008, with the average house price down 14 per cent to £124,378.

Because of the need for such large deposits, the number of first-time buyers has actually plunged since 2008; there were just 84,000 in the first half of this year, some 23 per cent fewer than in the same period in 2008.

Halifax says the cost of buying would be broadly in line with the cost of renting if the Bank of England base rate rose by 1.5 per cent above its current historic low of 0.5 per cent. This would put average monthly mortgage costs at £681, slightly above average rents.

Halifax housing economist Suren Thiru says: “The recent decline in the cost of buying for first-time buyers compared to renting has been substantial and reflects the drop in both mortgage rates and house prices since 2008, as well as a marked increase in average rent paid over the past year.

“However, while these affordability gains are welcome, conditions in the housing market for those looking to get on to the property ladder remain challenging.”

Overall, says Halifax, the affordability of housing is at a 12-year high – measured by the proportion of disposable earnings devoted to mortgage payments.

Nationally, typical mortgage repayments for a new buyer – both first-time buyer and home-mover – accounted for 28 per cent of disposable income in the second quarter of this year, against an average 48 per cent when the market peaked in August 2007,

Halifax housing economist Martin Ellis says: “The improvement in affordability has been an important factor supporting housing demand this year.

“With the prospect of continuing low rates for some time yet, affordability is likely to remain favourable.”

Stuart Law, chief executive of property investment firm Assetz, says: “An improvement in affordability is good news for first-time buyers, with lower house prices and lower mortgage repayments making home ownership more accessible for those who are able to raise a deposit.”