Of course it appears cheaper!

Of course it appears cheaper!

9:19 AM, 20th June 2018, About 6 years ago 16

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Santander Bank have issued a widely reported press release: “Owning a home is cheaper than renting in all areas of the UK

The Bullet points of their latest research below:

  • Average first-time buyers could save over £2,250 a year once on the property ladder compared to renting
  • Londoners could make the biggest saving, as the average monthly rent is £289 higher than monthly mortgage payments
  • Smallest differential between rent and mortgage payments is in the East of England at just £43 per month

“The research shows that homeowners could save £2,268 a year if they were able to purchase a property rather than rent. The average monthly rent in the UK is currently £912 per household, compared to monthly repayments of £723 for the average first-time buyer household. Homeowners could save an average of £189 a month or £2,268 a year compared to renters.”

Of course renting at first glance will appear more expensive if you only compare it against mortgage payments! However how about the cost of:

  • Saving up Thousands of Pounds for a Deposit, Legal fees, Stamp Duty, valuation survey fees, lenders fees.
  • Property maintenance costs
  • Insurance costs
  • Building up a suitable credit profile and history
  • The opportunity cost for lack of mobility
  • I am sure readers can add many more in the comments section below

The above is only like for like between renting and living in your mortgaged property and doesn’t even start to take into account the additional costs for landlords to provide a service.

Miguel Sard, Managing Director of Mortgages at Santander UK said: “Many first-time buyers understandably focus on the challenge of saving for a deposit and wonder how they will afford a property. However, it is often assumed that when you purchase a property you will be under greater financial pressure and our research shows the reverse is true.

“Of course, buying a property is a major financial investment with upfront costs to consider, but long-term the financial benefits can be significant. With annual savings averaging well over £2,000, this can really mount up over time and of course once the mortgage is paid off you have a valuable asset to show for it. Getting independent advice and looking for competitive rates, is crucial to get the right mortgage to meet potential homeowners individual needs.”

The release continues:

“With the average first-time buyer deposit being £51,905, hopeful buyers are opting for alternative methods of saving. One in five (22 per cent) of those wanting to buy would consider selling shares in the property, offering a potential capital return when the property is sold, 38 per cent would consider moving back in with their parents while saving for a deposit and 21 per cent said they will give up alcohol to raise the funds. Other financial products UK adults looking to buy could use to help them get on the property ladder include Santander’s Regular eSaver account which pays up to five per-cent interest, or government funded plans such as Help to Buy and the Starter Home scheme.

Historically, renting has appeared cheaper, especially in areas like London and the South East, where property prices have consistently been high. But since 2010, where the economy saw a re-set, the UK has seen inflation fall and with it mortgage rates have come down significantly, meanwhile rents have steadily crept up.

Prospective first-time buyers in London are set to make the biggest monthly savings by making the switch from renting to property ownership, as average rents exceed mortgage payments by over £289 a month or £3,468 a year. First-time buyers in Northern Ireland would see themselves £178 better off per month. At the other end of the scale are those living in the East of England, where typical first-time buyer monthly mortgage payments exceed average rents by only £43.”

Table one: Comparison of average rental and mortgage costs by region

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Fed Up Landlord

9:42 AM, 20th June 2018, About 6 years ago

Obviously a press release to push Santander Mortgages. So in my area, West Midlands the saving is £996.
Less - House Insurance - £250
Boiler Service Package- £300
Routine Repairs - Taps
Lights, Toilets etc - £200
Planned Maintenance
Exterior Decorating,
gutter clearing, fencing - £250
Total - £1,000
Saving - £4.00
This was taken from one of my properties averaged out over three years.

Mark Alexander - Founder of Property118

10:03 AM, 20th June 2018, About 6 years ago

Reply to the comment left by Gary Nock at 20/06/2018 - 09:42
Good job you didn't have to replace a boiler, carpets, bathroom and kitchen Gary. Imagine the difference then!

KD South East

10:13 AM, 20th June 2018, About 6 years ago

This really annoys me, as historically renting was always cheaper up until the mid 1980’s as there was the understanding that landlords would have a great asset (a property) at the end of a mortgage. And those who wanted to buy could do so and those who weren’t in that position or who wanted to rent, did that.
This only changed when ‘buy to let’ mortgages came in and banks demanded as part of their criteria that the rent cover more than the mortgage. 110% as I vaguely remember.
The long term effects of that policy are what we are living with now, with massively increased housing costs - whereas renting or buying a home previously took roughly a quarter of one persons wage. I live in the south east and see people crippled by rents, and only able to buy a one bed flat if the banks were to agree to 8 x their salary.
Now that the banks are left effectively holding a large amount of property, where landlords have taken interest only mortgages and remortgaged as a business strategy, they want to turn it around so that there are more homeowners just in case there’s a crash. They don’t want to be left holding the baby.
I’m not sure if incorporation has different financing rules, wondering why there’s been a push towards that with S24?
None of these changes have landlords, tenants or homeowners in mind. They are all about the banks - always have been.


11:22 AM, 20th June 2018, About 6 years ago

These 'hidden' costs owners are responsible for are just the tip of the iceberg, and banks are doing their customers a disservice by not pointing this out.
On the basis that the majority of new build homes typically targeting first time buyers and young families are 'Leasehold' or 'Fleecehold', they are not only faced with all the usual costs and, importantly, responsibilities of home ownership, but they then face being exploited by greedy and immoral developers and ground rent companies, with potentially uncapped service charge costs, ground rent payments, large unplanned repair bills, and permission fees for e.g. owning a puppy or changing a carpet... PLUS... massive legal costs and potential home forfeiture if you break the terms of the lease or fail or refuse to pay. If that wasn't enough to deter home ownership, how about being unable to sell your 'home' if you need to move for work or your family grows!
The cost of the stress associated with leasehold is not only financial, but physical and emotional.
This is what many thousands of 'amateur' BTL landlords live with every day, but their tenants don't see any of that!

Old Mrs Landlord

11:52 AM, 20th June 2018, About 6 years ago

I notice that while the table shows those in the east of England paying £43 more in rent than mortgage, the text of the release says mortgage exceeds rent. Crossed wires somewhere.
Of course, there is no mention of the costs landlords have to bear because some tenants do not take care of the property since it does not belong to them, leave owing rent or, worse still, refuse to leave until they've caused the landlord hefty court fees and loss of rent while the property is in unlettable condition.


12:04 PM, 20th June 2018, About 6 years ago

We grew up in council housing, and even though we paid rent, we treated it like our own home. Even to the point of installing our own gas fires (to thaw the ice on the inside of the windows!) and building a bathroom extension in the garden (so we didn't have to use the tin bath in the Kitchen!). We 'ad it tough in them days!
The point I'm making is renters, even in social housing, display zero responsibility for their 'home', but expect everything to be done for them, and if it isn't, it's all the landlord's fault and the government should legislate to protect them against the 'greedy' landlords.
Driven by the likes of Shelter and Generation Rent, immigration, massive pressure on social housing, and unfair and misguided government taxation and legislation of amateur BTL landlords, I think it will soon reach breaking point, if it isn't already there, where demand cannot be met by supply.
There has always been a majority of the population who cannot buy... and very soon... will not be able to rent either!

Sam Addison

12:33 PM, 20th June 2018, About 6 years ago

If you need to move houses every 2 years or so because of your work then estate agents fees alone will eat up the difference. Add in the length of time it can take to sell a property nowadays, often several months, and I can see why many younger people prefer to rent!

Alison King

12:55 PM, 20th June 2018, About 6 years ago

My tenants would be better off buying than renting and I have tried persuading some of them of that. They say they don't want to be tied down and they don't want the responsibility. They like the freedom of being able to move around even if they don't actually take advantage of that freedom. I was the same in my twenties.


14:30 PM, 20th June 2018, About 6 years ago

Reply to the comment left by Alison King at 20/06/2018 - 12:55
You've highlighted the lack of flexibility of owning, but I have to disagree that your tenants would be better off buying. The above 'hidden' ownership issues speak for themselves, and if I was a young potential buyer, I would stick with renting.

There are hundreds of thousands of new leaseholders who thought they would be owning their new homes, only to find they are not owning and worse than renting.

Mark Alexander - Founder of Property118

15:33 PM, 20th June 2018, About 6 years ago

Personally, I’d still encourage all youngsters to buy property, but not their home. Then they can have the best of both worlds in terms of flexibility and capital appreciation to help fund their retirement and long term care costs.

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