In 2011, the monthly cost associated with home buying was £78 (11%) lower than renting. Over the past year, buying costs have dropped by 3%, while the cost of renting has increased by 5%.
In contrast, in 2008 average home buying costs (£1,048) were 45% (or £324) more than the average monthly rent paid (£724).
The substantial improvement in the affordability of buying relative to renting largely reflects a 43% drop in home buying costs since 2008; caused by a marked fall in both house prices and mortgage rates. The average mortgage rate for a new borrower has declined by more than two percentage points over the last four years from an average of 5.91% in June 2008 to 3.82% in June 2012. Over the same period, the typical UK house price has decreased by a tenth. In contrast, the typical rent paid has risen by 11% (£72) since 2010.
Monthly home buying costs currently account for less than a third (29%) of average UK disposable income, down from over half (54%) in 2008. Home buying costs in 2012 also account for a smaller proportion of average UK disposable income than rental payments (29% against 35%).
Despite the improvement in affordability, the number of buyers in the UK housing market has fallen significantly over the last four years. There were 535,200 buyers (with a mortgage) in the 12 months to June 2012; a third (33%) lower than the same period in 2008 (793,600).
The recent Halifax housing confidence survey6 showed that more than half the respondents to the survey highlighted the challenge of raising a deposit (58%) and concerns about job security (56%) as the main barriers to buying a home.
Home buyers – both first-time buyers and homemovers – put down an average deposit of £40,526 in June 2012, equivalent to a quarter (25%) of the property price. The average deposit required has risen by 68% (£16,387) over the past decade from £24,140 in June 2002.
Martin Ellis, housing economist at Halifax, 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.
"Despite the improvement in buyer affordability, the housing market nationally continues to tread water. Those getting on the housing ladder still face challenges, most notably in getting a deposit, and this challenge, along with the considerable uncertainty regarding the economic outlook, is still contributing to subdued housing demand. However, it is worth noting that once homebuyers are on the first rung, their monthly costs are notably lower."
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