First-time buyers are paying 20% less a month on their mortgage payments compared to what tenants pay in rent, new data reveals.

The findings by Zoopla claimed first-time buyers fork out £1,038 a month compared to average rents of £1,248 a month by tenants.

The calculations are based on first-time buyers having paid a 20% deposit, equating to £50,740 for a typical first-time buyer property costing £253,700.

First-time buyer deposits tend to be larger - at 30% - in London, where house prices are typically higher compared to the rest of Britain.

Regional variations

The data suggested it is cheaper to buy than rent across all areas of Britain, with the exception of the East of England, where it is 9% more expensive.

The cost of buying versus renting is close across the South East and the East Midlands regions, with the widest gap in the North East where mortgage repayments are 24% below rents.  

In total, Zoopla analysed the cost of renting and buying across 118 postal areas of Britain.

Buying costs are below rental costs in Glasgow - at 46% lower - and Edinburgh at 32% lower, and in areas in northern England, including Newcastle at 34% lower, and Liverpool at 31%. They are also 31% lower in Cardiff, Wales.

Buying costs more than renting in 10% of postal areas led by the Harrogate where buying costs 15% more than renting followed by the Watford at 7%.

In areas with higher house prices the cost of buying a first home is higher, which prices out more first-time buyers and puts extra pressure on the rental market, pushing rents higher, Zoopla explained.

Mortgage regulations introduced in 2015 mean first-time must show they can afford a higher mortgage rate if borrowing costs were to increase.

Many lenders are currently carrying out this so-called ‘stress testing’ affordability at an 8% mortgage rate.

This tilts the renting versus buying balance, pushing monthly mortgage repayments above the cost of renting across all regions and countries of Britain.

Richard Donnell, of Zoopla, said: “The more first-time buyers priced out of home ownership, the greater the pressure on the private rental market and rental levels.

“Proposals to review regulations around mortgages are welcome. We do not want to return to the loose lending that preceded the global financial crisis.

“A modest loosening in lending rules with mortgage stress testing rates closer to 6% to 7% would help more middle to higher income renters access home ownership and ease some of the pressure in the rental market without causing a boom in house prices.”

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