Buying A House For First Time Will Save £670 a Year On Rent
Halifax have released figures for June that reveal how much the average first time buyer will have to pay each month in mortgage repayments compared to the average renter. The information takes into account people who are buying a three bedroom house and compares them to those who are renting a property of the same type.
The average price of this form of property for mortgage holders is £666 per month whereas this figure stood at around £722 for people who were renting the property. This monthly variation is equal to £670 over the course of a whole year.
The cost of taking out a mortgage has fallen in recent times, meaning that first time buyers have had better offers at their disposal. This has happened at the same time as rent has been rising meaning that the difference between the two have grown.
Whilst this may sound like wonderful news for any potential new homeowners, this gap in cost is actually shrinking. The cause of this is the continued increase in the cost of houses. Whilst rates have fallen from an average of 2.91% from a previous rate of 4.92%, the average price of a three bedroom house has risen by 25%.
Rents have risen by an average of 23% over that same length of time, according to Halifax.
As of June 2014, first time buyers were spending £1,018 less per year - the equivalent of £85 per month. Both renting and buying have gone up in price but the 8% rise in the value of homes has meant that this gap has got smaller.
These figures from Halifax also revealed that in London people who are buying will save themselves on average around £970 per year. However in the South East of England, renting actually works out as cheaper by £98 due to the high cost of buying a house there.
The Office for National Statistics stated that the average cost of a house in the UK has risen from £265,000 to £277,000 over the year leading up to June. They also revealed that the average cost of a house for a first time mortgage holder has gone up by around 5.1% - taking the cost to an average of £213,000.
There is growing evidence to suggest that younger individuals are now being priced out of the market for property ownership due to the fact that they now need more than twice their average earnings in order to secure a mortgage for a starting property.
The average first time buyer's deposit sits at around 17% and they would need to take out a mortgage with a value of £175,000 if not more. The vast majority of mortgage providers will not lend out mortgages for higher than four times the salary of the applicant. What this means in reality is that young buyers will need to be earning £38,917 every year in order to be able to take out a mortgage for their first home.
However the average salary of somebody between the age of 20-24 is around £16,400. This means that these young people will have to find a way to earn £22,517 more, if they wish to buy a home.
People who are renting properties could now see themselves being forced to pay higher prices due to the changes being introduced by the conservative chancellor George Osborne. The Tory MP has introduced plans to cut down on tax relief on buy-let mortgages meaning that there is a strong possibility landlords will end up raising their rent in order to cover their losses.
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