Every year some 350,000 people buy their first home in the UK and for many the decision to get on the property ladder has followed years of savings, planning and dreaming.
Part of nailing their first home is the hope that they will be better off financially once they’ve put their deposit down, signed up to a mortgage and put their names on the deeds.
But the reality is, for many homeowners particularly in the south of England and London, the day-to-day running costs of a mortgaged home can be higher than renting, although of course someone who owns their own home will hopefully see its value rise, unlike someone who rents.
Research published recently revealed that on average it is cheaper to rent rather than own a property across the UK’s largest 50 cities by £47 a month.
And, the research by Zoopla showed, in many of the cities in the south this difference can be much higher – more than £1,000 a month in London and Cambridge, and £300 in Reading and Brighton.
The figures are based on average rents for a two-bedroom apartment in each city, which were compared to the cost of a 25-year 90% loan-to-value repayment mortgage for £147,233, the average house price in the UK at the moment.
How much a first-time buyer's monthly mortgage payments will be depends largely on their credit score. The better it is, the lower the interest rate they are likely to pay. That's why it's crucial for anyone preparing to get on the property ladder to ensure their credit score is high as possible. And until recently a tenant's rent didn't count towards their credit score, but now it can be, if they pay their rent through CreditLadder.
But there's another factor in play. House prices; the further south you venture to buy a home, the higher house prices are and the more likely it is that renting will be cheaper. As you go north, the opposite is true.
For example, in Glasgow the average two-bedroom apartment costs £95,000 or £475 a month with a mortgage. But to rent the same flat would be £649 a month.
But averages, although useful, don’t tell the whole story. What about the real world? Here are five two-bedroom apartments from cities across the UK for which we’ve drilled down to find out if it would really be cheaper to rent a two-bedroom apartment than own one – based on average prices for this kind of property in each area.
Brighton
Lewes Crescent, BN2 - £289,950
In a nutshell
Two bedrooms, two livings rooms, 2nd floor, balcony, kitchen, bathroom.
Buy
10% deposit: £29,000
Likely monthly mortgage: £1,306
Rent
Deposit: £1,975 (six weeks)
Likely monthly rent: £1,350
Verdict: Cheaper to buy
London
Hubert Grove, Clapham
£469,950
In a nutshell
First floor, two bedrooms, lounge/diner, kitchen, bathroom.
Buy
10% deposit: £46,995
Likely monthly mortgage: £2,353
Rent
Deposit: £2,500 (six weeks)
Likely monthly Rent: £1,712
Verdict: Cheaper to rent
Manchester
Chapel Street, Salford
£170,000
In a nutshell
Two bedrooms, kitchen/lounge/diner, bathroom.
Buy
10% deposit: £17,000
Likely monthly mortgage: £851
Rent
Deposit: £1,280 (six weeks)
Likely monthly Rent: £875
Verdict: Cheaper to buy
Birmingham
Cardinal Close, Bearwood
£144,995
In a nutshell
Second floor, hallway, kitchen, lounge, bathroom, two bedrooms, communal garden.
Buy
10% deposit: £14,495
Likely monthly mortgage: £726
Rent
Deposit: £1,280 (six weeks)
Likely monthly Rent: £625
Verdict: Cheaper to rent
Newcastle upon Tyne
Sandringham Road, South Gosforth
£140,000
In a nutshell
Ground floor conversion flat, two bedrooms, lounge, kitchen,
Buy
10% deposit: £14,000
Likely monthly mortgage: £701
Rent
Deposit: £841 (six weeks)
Likely monthly Rent: £575
Verdict: Cheaper to Rent
Remember, CreditLadder can help you improve your credit score.
CreditLadder can improve your credit position by reporting your rent payments. CreditLadder is the first way to improve your credit score and position across all three of the main Credit Reference Agencies in the UK, namely Experian, Equifax and TransUnion. Building up a high credit score has a lot of benefits, including helping you access finance at better rates - this can also help save you money. CreditLadder also runs a free mortgage application service in partnership with Tembo which will tell you how much you could borrow.
Remember the content provided in this article is for information purposes only and should not be considered as advice.