First-time buyers save thousands: Lloyds Bank reveals buying beats renting
The plunge into the world of buying a new home can be very daunting, especially if you are a first-time buyer and particularly if you are limited for cash.
The general consensus is that you might as well rent a place rather than buying one because it’s a known amount that you are going to pay out each month and you’re not so tied to one specific location. It’s also commonly thought that rental, while expensive in itself, is usually much cheaper than buying your own home, so why upset the status quo?
Lloyds Bank research challenges rental myths
However, Lloyds Bank has carried out research that shows the true position is at odds with these beliefs.
The data is derived from analysis by Lloyds of 11 cities outside London comparing the average monthly rental costs with typical first-time buyer mortgage payments. It has revealed that on average first-time monthly mortgage payments are typically 17% cheaper than renting, even if you have managed to secure a loan with just 5% deposit.
Usually, the lower the deposit, the greater the risk leading to higher interest rates charged. This is particularly interesting since a recent Building Societies Association survey viewed saving for a deposit as being the biggest hurdle to buying their first home.
The average 5% deposit is £11,412 for a typical first-time buyer property price of £228,233.
Glasgow leads savings for first-time buyers
Of those eleven cities, Glasgow is the best-performing for first-time buyers, with the biggest gap of £4,750 in savings over a typical rental property charge.
Complete breakdown: Monthly costs and annual savings by city
| City | Average Price | 5% Deposit | Monthly Mortgage | Monthly Rent | Annual Saving |
|---|---|---|---|---|---|
| Glasgow | £172,000 | £8,600 | £855 | £1,251 | £4,752 |
| Newcastle | £180,000 | £9,000 | £895 | £1,112 | £2,604 |
| Edinburgh | £243,000 | £12,150 | £1,208 | £1,392 | £2,208 |
| Bristol | £311,000 | £15,550 | £1,547 | £1,778 | £2,772 |
| Manchester | £234,000 | £11,700 | £1,164 | £1,317 | £1,836 |
| Nottingham | £183,000 | £9,150 | £910 | £996 | £1,032 |
| Leeds | £209,000 | £10,450 | £1,039 | £1,098 | £708 |
| Liverpool | £167,000 | £8,350 | £830 | £864 | £408 |
| Birmingham | £208,000 | £10,400 | £1,034 | £1,068 | £408 |
| Cardiff | £231,000 | £11,550 | £1,149 | £1,138 | -£132 |
| Sheffield | £190,000 | £9,500 | £945 | £893 | -£624 |
| GB Average | £228,233 | £11,412 | £1,135 | £1,360 | £2,700 |
Source: Lloyds Bank
Long-term benefits beyond monthly savings
Even in places such as Cardiff and Sheffield where renting is marginally financially preferable each month, it’s worth considering that owning a property is more beneficial in the long run because it provides far better security, while accruing equity in the home when the housing market is buoyant.
For example, Lloyds found that Bristol was the best place to build up the accrued equity, adding almost £25,000 over a period of just five years.
As Amanda Bryden, Head of Mortgages at Lloyds, said of the results:
“We know that saving for a deposit is one of the biggest hurdles for first-time buyers. With rents having risen sharply over the last two years, many are already managing monthly payments that are higher than a typical mortgage. That’s why low-deposit mortgages could be the right solution for many – helping people move from renting to owning sooner than they thought possible.”
Get affordable conveyancing for your first home
At Best Value Conveyancing, we understand that first-time buyers need quality legal services at competitive prices. We offer:
- Fixed-price quotes with no hidden fees
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Start your property purchase today: Call 0800 0387 007 for your fixed-price quote.
