First-Time Buyer Mortgage Payments 20% Lower Than Average Rents, Says Zoopla

First-Time Buyers Benefit from Lower Monthly Payments Compared to Renters

According to the latest data from Zoopla, first-time buyer mortgage payments average £1,038 per month, which is 20% lower than the typical rental cost of £1,248 per month across Great Britain. This trend highlights that buying a home is now more affordable than renting in most regions, making homeownership an increasingly attractive option for renters looking to step onto the property ladder.

Buying Cheaper Than Renting in Most UK Regions

The analysis shows that purchasing a property is more cost-effective than renting in nearly all areas of the UK, with the East of England being the only exception, where buying is 9% more expensive than renting.

In the South East and East Midlands, the cost difference between buying and renting is marginal. However, in the North East, mortgage repayments are 24% lower than rental costs, making it the most affordable region for first-time buyers.

Best Areas for Buying vs. Renting

Several cities and regions demonstrate significant savings for buyers compared to renters:

• Glasgow (46% lower buying costs)
• Edinburgh (32% lower buying costs)
• Newcastle (34% lower buying costs)
• Liverpool (31% lower buying costs)
• Cardiff (31% lower buying costs)

However, in around 10% of UK postal areas, buying remains more expensive than renting. The Harrogate (HG) postal area leads the list, where mortgage payments are 15% higher than rent, followed by Watford (WD) at 7% higher.

Affordability Challenges for First-Time Buyers

Despite the financial benefits of buying, affordability remains a hurdle for many. The average 20% deposit required for a first-time buyer ranges from £27,700 in the North East to £83,400 in London, making it difficult for many prospective homeowners to save for a deposit.

Parental Support and Mortgage Affordability Tests

With high deposit requirements, many first-time buyers rely on family support, with 63% admitting they received financial help when purchasing their first home. Additionally, mortgage regulations introduced in 2015 require buyers to pass affordability stress tests, proving they can afford higher mortgage rates should interest rates rise.

Currently, lenders are stress testing affordability at an 8% mortgage rate, pushing monthly repayments above rental costs in some regions. This difference varies, with mortgage payments being 10% higher than rent in the North East and over 50% higher in the East of England.

Impact of Mortgage Regulations on the Housing Market

Zoopla highlights that these regulations have prevented housing market volatility during periods of fluctuating interest rates. However, they have also made it harder for middle-income buyers to secure mortgages, increasing demand for rental properties and pushing rents higher.

Zoopla’s Executive Director, Richard Donnell, commented:

“Our renting versus buying analysis is welcome news for would-be first-time buyers who have faced steep rent increases over the past three years.”

“Challenges remain, particularly for those on average incomes or with small deposits. Mortgage regulations introduced in 2015 were designed to prevent a boom-and-bust housing market, but they have made it harder for many to access homeownership.”

“The more first-time buyers are priced out of homeownership, the more pressure is placed on the rental market, driving rents even higher.”

“A review of mortgage regulations is welcome, though we must avoid a return to the reckless lending that led to the 2008 financial crisis. A modest easing of stress testing, with rates closer to 6-7%, could help more renters transition to homeownership without inflating house prices.”

Key Takeaways for First-Time Buyers

• Buying is cheaper than renting in most UK regions, with notable savings in Glasgow, Edinburgh, Newcastle, Liverpool, and Cardiff.
• A 20% deposit remains a significant barrier, ranging from £27,700 in the North East to £83,400 in London.
• Mortgage stress tests at 8% rates make it harder for first-time buyers to secure loans, keeping many in the rental market.
• Calls for relaxed mortgage regulations could help ease homeownership access for middle-income renters.

For prospective buyers, understanding these financial dynamics is crucial in making informed decisions. While affordability remains a challenge, the long-term savings from homeownership continue to make buying a strategic financial move compared to renting.