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Buying cheaper than renting - study
Home buyers are almost £900 better off a year than those who rent - but an upturn in house prices means the gap has narrowed in recent months, a report has found.
Research by Halifax found that people buying a three-bedroom house face typical costs of £672 a month, which is £73 less than the average £745 a month cost of renting.
Five years ago, renting was considered much more financially attractive than buying, but home buying costs have since fallen by more than a third (37%), meaning that buying has become cheaper than renting.
Much of this about-turn is due to falls in house prices following the economic downturn combined with ultra-low mortgage rates in the low interest rate environment, which have been pushed lower over the last year by the Government's flagship Funding for Lending scheme to kick-start the housing market.
A mortgage price war broke out after the launch of Funding for Lending, which has given lenders access to cheap finance to help borrowers. The average mortgage rate for a new borrower has fallen from 5.88% in June 2008 to 3.57% by June this year.
Meanwhile, rental costs have been pushed higher by strong demand in the sector, as many renters have struggled to get on to the property ladder in the tough economy.
But a return to activity in the housing market has pushed house prices up, which means that the gap between buying and renting costs has narrowed from a difference of £78 a month one year ago.
People living in London and Northern Ireland have the most to gain from buying rather than renting, the research suggested. The gap in percentage terms is biggest in Northern Ireland, at 11%. Buying in Northern Ireland costs £369 a month on average, while renting costs £415.
In cash terms, Londoners have the most to gain from being on the property ladder, with a saving of almost £100 a month. Wales and Yorkshire and the Humber were the only areas of the UK where renting was found to be more affordable than buying. In Scotland, buying was found to work out £27 a month cheaper than renting.
Martin Ellis, housing economist at Halifax, said: "A combination of lower mortgage rates and declining house prices has substantially reduced the cost of buying over the past six years. Nevertheless, the number of home buyers in the 12 months to June 2013 was nearly half of that in 2008, which will have been constrained by worries over job security."