Renting home costs £1,000 a year more than buying

FAILURE to get on the property ladder is now costing young professionals almost £1,000 a year as the “rent gap” widens, a study has found.

Data from Halifax showed that the average cost of buying a three-bedroom home, including mortgage payments, was £679 in December 2017. That was £75 a month less than the average monthly rent of £754. The gap between the cost of buying and renting has climbed to its highest level in four years at £900 a year, Halifax said, up 44 per cent from £623 last year.

It comes amid fears among Tory MPS that young people’s failure to get on the property ladder is an “iceberg” that could sink the party at the next election.

Figures show that buying is consistently more financially beneficial than renting across the UK, with the greatest annual saving in London (£2,191), and the smallest saving in Yorkshire & the Humber (£589). As a percentage, the biggest savings are made in Scotland and the south-west of England, where the cost of buying is 17 per cent lower than renting.

In addition, 100 per cent of the costs of renting are paid to a landlord, while the majority of homeowners’ outlay goes towards building up equity in their home, and a small portion is paid to the bank as mortgage interest.

Yesterday a report by the Institute for Fiscal Studies showed that young middle-class professionals are half as likely to get on the housing ladder as they were 20 years ago.

Just one in four young middle-income families now owns their own home, down from two in three in the Nineties. It means qualified workers including teachers, nurses, tradesmen and administration workers, who could once comfortably buy their own home, are now stuck renting into their 30s.

Fears are mounting within the Conservative Party that the Government is failing to build enough homes and that Jeremy Corbyn, the Labour leader, is cutting through to “Generation Rent”.

Russell Galley, the Halifax managing director, said: “The gap between buying and renting has widened significantly, primarily driven by a reduction in mortgage rates and a more competitive market pushing down monthly payments. Meanwhile, the cost of rent, household maintenance and average deposits have remained broadly flat. Despite having to put down a sizeable deposit up front, homeowners are overall better off than renters in all parts of the UK. But those who are unable to get on to the property ladder because they can’t raise enough cash are paying more by renting.

“The good news is that record numbers of first-time buyers are still taking their first step on to the ladder and helping to bridge this gap thanks to a continued low-rate environment and government schemes.”