The Halifax has published its latest review into the costs of renting against buying a property.
The review looks at the cost of renting and buying a three bedroom property with an average cost of £157,400 in different parts of the UK and shows that buying is now almost 20 per cent cheaper than renting.
It found that the cost of buying a home is now £132 a month cheaper than renting, the highest difference ever recorded since the survey started in 2008. The average cost for renting such a property is £732 a month.
The difference comes to more than £1,500 a year, equivalent to a full month’s take-home pay for the average UK worker.
Last year the survey found that buying was £78 or 11 per cent cheaper than renting. However, in the past 12 months the cost of buying has fallen by three per cent, whilst rental costs have increased by five per cent.
Buying is cheaper than renting across all 12 regions in the UK. By contrast renting was cheaper than buying in all 12 regions four years ago.
The biggest gap is in London where a homeowner can service a mortgage and other costs of buying a house for £1,108 if the own it but must pay £1,284 if it is rented.
The average cost of buying a property includes mortgage repayments, income lost by funding a deposit rather than saving, spending on household maintenance and repair and insurance costs.
The data shows a massive turnaround in the cost of buying a home since 2008, when interest rates were higher, before the Bank of England dramatically reduced rates to their current record low level of 0.50 per cent.
In 2008, the average monthly cost of buying a home was £1,048, compared to £724 for renting a home. This means that buying a home then was £324 a month more expensive or 45 per cent.
The turnaround is linked to a 43 per cent reduction in home buying costs since 2008. This is caused by a fall in house prices since the peak of the summer of 2007 and a drop in base rate and subsequent mortgage rates offered by lenders.
It was March 2009 when the Bank of England’s series of base rate cuts ended with the final drop to 0.50 per cent.
Martin Ellis, Halifax housing economist said: “It is clearly encouraging that there has been a significant decline in the cost of buying a home for those able to enter the housing market since 2008.
“The improvement is due to a combination of lower mortgage rates and declining house prices. In contrast, market conditions for renters have deteriorated as rents have risen in the past two years.”
The average mortgage rate for homeowners has fallen by more than two per cent in the last four years from 5.91 per cent in June 2008 to just 3.82 per cent in June 2012. Over the same period, the average UK property has seen a ten per cent fall in value.
By comparison rents have increased by 11 per cent since 2010. They now take up 35 per cent of a tenants’ disposable income.
This means that monthly home buying costs now take up just 29 per cent of the average household’s disposable income, down from more than half, 54 per cent, in 2008.
Last month, Halifax reported that mortgage repayments were at a 15-year low as a proportion of net income for a homeowner.
However, though it is relatively cheap to service a mortgage, it has become increasingly difficult to actually get one. The number of new people getting a mortgage in 2012 was a third lower than in 2008, 535,200 new buyers compared to 793,600.
This is because of tighter borrowing criteria from lenders since the credit crunch and the fact that first-time buyers have to stump up double the deposit.
The survey showed that 58 per cent of respondents found that raising a deposit was the biggest barrier to buying a home, closely followed by 56 per cent who cited job security.
The average deposit was £40,526 in June 2012, equivalent to 25 per cent of the property price. This is a 68 per cent increase on the average deposit required ten years ago, when it was £24,140.
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