Buying vs renting a home, which is cheaper?

The monthly cost of owning a home is once again much cheaper than renting, as reduced mortgage rates tip the balance further in favour of first-time buyers.

Analysis by property website Zoopla found that the average monthly mortgage cost for a typical first-time buyer is now 17 per cent cheaper than the average rent.

A year ago, the average mortgage repayments for a typical first-time buyer property with a 20 per cent deposit on a 30-year term were £1,085, versus £1,110 for a similar rental property.

The cost of renting has since increased by 5 per cent to £1,170 per month, while lower mortgage rates have reduced the average mortgage repayment rate by 10 per cent to £972.

A recent announcement from Amanda Bryden, head of Halifax Intermediaries and Scottish Widows Bank, set forth that the Halifax will additionally lend more to buyers of homes with good ratings on their EPC.

“We know that typically, more energy efficient homes are cheaper to run. Using EPC data and energy bill analysis, we’re able to reflect that in mortgage affordability” she has told brokers.

This means that borrowers buying the the most energy efficient homes – for example EPC A or B rated such as our homes – will “see an increase in the amount [we’re] able to lend”.

The lender also says: “Homes with the lowest energy efficiency ratings, i.e. EPC F and G, will see a reduction in the maximum loan amount.”

An example of the change for a customer looking for a mortgage for a property valued at £215,000 could borrow £194,000 if the property has a rating of A or B, versus £191,000 if rated at C to E, or £190,000 if rated at F or G.

Although the information provided is believed to be accurate at the date of publication, you should always check with the product provider to ensure that figures are the most up to date.