According to a recent report from the lender Halifax, buying a home was more cost-effective than renting in eleven out of the twelve UK regions in December 2011. In contrast, buying was more costly than renting in all regions in December 2008, demonstrating the considerable turnaround over the last three years.

Despite having higher absolute costs, buying is currently most affordable relative to renting in London with the average borrower in the capital paying 10.2% less per month than the typical private tenant. At the other end of the spectrum, Wales is the only region where renting remains cheaper than buying.

"The affordability gains for buyers relative to renters in the last three years have been significant,” says Martin Ellis, housing economist at Halifax. “The average mortgage payment has fallen dramatically over recent years as a result of falling house prices and mortgage rates. At the same time, rents have risen due to strong demand for rented accommodation. Nonetheless, despite the improvement in the relative affordability of buying a home, the number of purchasers has continued to fall due to the ongoing challenges in raising a deposit and the considerable uncertainty over the prospects for the UK economy, which have severely constrained housing demand."

The data from Halifax shows that the monthly costs associated with buying accounted for 29% of average UK disposable income in 2011, compared to 47% in 2008.

Home buying costs have fallen by more than a quarter (£328) since 2008, driven by a decline in the average monthly mortgage payment of nearly one-third (£242) due to the marked fall in mortgage rates and house prices. The mortgage rate for a new borrower has been reduced to an average of 3.63% in 2011 from 5.75% in 2008, while the average house price has dropped by 11% over the same period 3.

Meanwhile, the average cost of renting has risen by 9% (£62) since 2009. Higher demand for rental property, driven partly by the difficulties for potential buyers entering the housing market, has pushed up rents.

Over the past year, buying costs have dropped by 5% whilst the typical cost of renting has risen by 5%, continuing the trends seen in 2010.

Average monthly mortgage and rental payments by region, December 2011




Average monthly buying costs


Average monthly rental costs


% difference

North


£449


£488


-8.0%

Yorkshire and Humberside


£462


£488


-5.3%

North West


£483


£525


-8.0%

East Midlands


£482


£506


-4.7%

West Midlands


£529


£539


-1.9%

East Anglia


£579


£612


-5.4%

Wales


£479


£474


1.1%

South West


£685


£710


-3.5%

South East


£811


£858


-5.4%

Greater London


£1,089


£1,212


-10.2%

Northern Ireland


£396


£413


-3.9%

Scotland


£510


£540


-5.5%

Average in UK*


£600


£716


-16%

Sources: Halifax, Birmingham Midshires and ONS