Research by Lloyds – which compared average monthly rental costs with typical first-time buyer mortgage payments across 11 cities – found that in nine cities, owning a home works out cheaper than renting on a monthly basis.
The report found that the average first-time buyer house price in Great Britain was £228,233, so assuming a 5% deposit and average mortgage rate of 4.78% for five years with a 30-year term, the monthly mortgage cost would be £1,135.
This compares to a monthly rent cost of £1,360, meaning getting on the property ladder could save £225 per month or £2,700 per year.
In Glasgow, mortgage payments were around 32% cheaper than rent, with first-time buyers saving around £396 per month or £4,752 per year.
Newcastle came second, with the difference between mortgage versus rent estimated at 19.5%, equal to a monthly saving of around £217 and an annual saving of £2,604.
Edinburgh came third, with a mortgage versus rent difference of 13.2%, with a monthly saving of £184 and annual saving of £2,208.
| City | Average first-time buyer price | 5% deposit amount | Monthly mortgage cost | Monthly rent cost | Mortgage vs rent saving | Monthly saving | Annual saving |
| Glasgow | £172,000 | £8,600 | £855 | £1,251 | 31.7% | £396 | £4,752 |
| Newcastle | £180,000 | £9,000 | £895 | £1,112 | 19.5% | £217 | £2,604 |
| Edinburgh | £243,000 | £12,150 | £1,208 | £1,392 | 13.2% | £184 | £2,208 |
| Bristol | £311,000 | £15,550 | £1,547 | £1,778 | 13% | £231 | £2,772 |
| Manchester | £234,000 | £11,700 | £1,164 | £1,317 | 11.6% | £153 | £1,836 |
| Nottingham | £183,000 | £9,150 | £910 | £996 | 8.6% | £86 | £1,032 |
| Leeds | £209,000 | £10,450 | £1,039 | £1,098 | 5.4% | £59 | £708 |
| Liverpool | £167,000 | £8,350 | £830 | £864 | 3.9% | £34 | £408 |
| Birmingham | £208,000 | £10,400 | £1,034 | £1,068 | 3.2% | £34 | £408 |
| Cardiff | £231,000 | £11,550 | £1,149 | £1,138 | -1% | -£11 | -£132 |
| Sheffield | £190,000 | £9,500 | £945 | £893 | -5.8% | -£52 | -£624 |
| GB average | £228,233 | £11,412 | £1,135 | £1,360 | 16.5% | £225 | £2,700 |
Lloyds said that not only would getting on the property ladder be cheaper than renting, it also “offers more security and helps build financial stability”.
The bank said that over five years, a buyer with a 5% deposit could cut the loan-to-value (LTV) ratio from 95% to 87%, even if house prices remain flat.
It said this meant prospective first-time buyers could build more equity in the home, minimise the risk of negative equity and get better access to future mortgage deals.
Taking into account cheaper mortgage payments compared to renting, as well as building equity, a first-time buyer could be £32,000 better off after five years, or £20,500 when taking into account the deposit.
Amanda Bryden, head of mortgages at Lloyds, said: “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.
“It’s also important to consider other upfront costs like legal fees and moving expenses – but for most, the long-term savings will outweigh these.”
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