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Halifax: Rising interest rates hit UK renters hard

According to new research from Halifax, homeowners in the UK are almost £500 better off a year than renters.

The mortgage lender said that the average monthly cost of owning a three-bed home for first-time buyers is now £971, which is £42 lower than the average cost of renting a comparable property. Renters pay, on average, £1,013 each month – 4% more.

The cost of mortgages has increased as the Bank of England has raised interest rates ten times since December 2021 to 4%. This equates to a saving of almost £500 a year for owners. However, the gap has narrowed since 2016, when homeowners saved £1,567 annually.

“Our latest analysis shows that becoming a homeowner can bring significant savings for people,” said Kim Kinnaird, mortgages director at Halifax.

“While a predicted fall in house prices this year will be welcome news for those looking to buy their first home, it doesn’t change the fact that getting on the property ladder remains expensive – a problem compounded when rents are high, impacting the ability to save.”

The difference is most pronounced in London, where homeowners pay nearly £3,000 less yearly than those renting similar homes. In percentage terms, the most significant gap is in Scotland, where renters pay an average of £918 a month compared with £727 for homeowners – a saving of 21% for those on the property ladder.

The east of England is the only region where it is cheaper to rent. Homeowners there pay £90 more each month, on average, than those renting.

While house prices have fallen in recent months, rents have risen and are forecast to keep rising, driven by growing tenant demand and a shortage of rental properties. Many smaller landlords are selling because of rising mortgage costs and tax changes.

Tom Bill, head of UK residential research at the estate agents Knight Frank, said: “To the frustration of tenants, rents are likely to stay higher for longer this year due to the resilience of the sales market, which means more asking prices are being met and fewer owners are becoming landlords.

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