Owning a home with just a 5 per cent deposit could be more affordable in these nine areas
Buying a home with a mortgage in some major cities across Britain could be cheaper than renting (Image: Peter Byrne/PA Wire )
Buying a home with a mortgage in some of the UK’s major cities could now be cheaper than renting – even with a small deposit – according to an analysis by Lloyds Bank.
The study compared the average monthly rental costs with potential first-time buyer house prices and mortgage payments in 11 major cities.
The results suggested that in nine of the cities, including Manchester, owning a property would cost less each month than renting.
But the study acknowledges that individual circumstances will vary and the research was based on having a 5 per cent deposit, a 4.78pc interest rate fixed for five years, and a 30-year repayment term.
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Lloyds used data from the Office for National Statistics (ONS) to calculate average first-time buyer house prices and average rental figures.
While the study considered potential mortgage payments, it did not account for additional costs such as legal fees or other ongoing expenses associated with home ownership.
London was excluded from the analysis due to its significantly higher property prices and different affordability dynamics.
The research found that the typical 5pc deposit needed could be around £11,412, based on an average first-time buyer property price of £228,233.
In Manchester, based on the average first-time buyer house price of £234,000, homeowners could save 11.6pc each year (£1,836) by owning a home rather than renting.
This is based on the average monthly mortgage costing £1,164, compared to the average rent cost of £1,317 per month.
Among the major cities outside London, the largest difference between owning and renting was found in Glasgow, where mortgage payments are as much as 32pc cheaper than rent.
Home buyers could potentially save up to £396 a month, or £4,752 annually, compared to renting, according to calculations by Lloyds.
With the average first-time buyer property price standing at £172,000, a deposit of merely £8,600 might be sufficient for some individuals to step onto the property ladder, it suggested.
Buying a house could be more affordable than renting(Image: PA)
Amanda Bryden, head of mortgages at Lloyds, commented: “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.”
Whilst purchasing a property may work out cheaper than renting in certain situations, some individuals may choose to rent for reasons including greater flexibility and the ability to relocate for employment opportunities.
Ms Bryden added: “The impact of growing equity in your own home – money that would otherwise have been lost in rent – means a more secure financial future.
“For anyone thinking about buying, speaking to a mortgage adviser or broker is a great first step.”
The major UK cities where it is cheaper to buy a home than rent:
Manchester
Average first-time buyer house price: £234,000
Amount needed for 5% deposit: £11,700
Monthly mortgage cost: £1,164
Monthly rent: £1,317
Percentage saved from owning a home rather than renting: 11.6 percent
Monthly saving: £153
Annual saving: £1,836
Glasgow
Average first-time buyer house price: £172,000
Amount needed for 5% deposit: £8,600
Monthly mortgage cost: £855
Monthly rent: £1,251
Percentage saved from owning a home rather than renting: 31.7 percent
Monthly saving: £396
Annual saving: £4,752
Newcastle
Average first-time buyer house price: £180,000
Amount needed for 5% deposit: £9,000
Monthly mortgage cost: £895
Monthly rent: £1,112
Percentage saved from owning a home rather than renting: 19.5 percent
Monthly saving: £217
Annual saving: £2,604
Edinburgh
Average first-time buyer house price: £243,000
Amount needed for 5% deposit: £12,150
Monthly mortgage cost: £1,208
Monthly rent: £1,392
Percentage saved from owning a home rather than renting: 13.2 percent
Monthly saving: £184
Annual saving: £2,208
Bristol
Average first-time buyer house price: £311,000
Amount needed for 5% deposit: £15,550
Monthly mortgage cost: £1,547
Monthly rent: £1,778
Percentage saved from owning a home rather than renting: 13 percent
Monthly saving: £231
Annual saving: £2,772
Nottingham
Average first-time buyer house price: £183,000
Amount needed for 5% deposit: £9,150
Monthly mortgage cost: £910
Monthly rent: £996
Percentage saved from owning a home rather than renting: 8.6 percent
Monthly saving: £86
Annual saving: £1,032
Leeds
Average first-time buyer house price: £209,000
Amount needed for 5% deposit: £10,450
Monthly mortgage cost: £1,039
Monthly rent: £1,098
Percentage saved from owning a home rather than renting: 5.4 percent
Monthly saving: £59
Annual saving: £708
Liverpool
Average first-time buyer house price: £167,000
Amount needed for 5% deposit: £8,350
Monthly mortgage cost: £830
Monthly rent: £864
Percentage saved from owning a home rather than renting: 3.9 percent
Monthly saving: £34
Annual saving: £408
Birmingham
Average first-time buyer house price: £208,000
Amount needed for 5% deposit: £10,400
Monthly mortgage cost: £1,034
Monthly rent: £1,068
Percentage saved from owning a home rather than renting: 3.2 percent
Monthly saving: £34
Annual saving: £408
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