London renters now pay £3,000 a year more than homeowners on housing costs

London renters now spend nearly £3,000 more than owners on housing costs, according to new data from Halifax.

However, with the cost of a first home in the capital now £587,700 on average, the typical deposit needed to get on the property ladder is now a staggering £188,700 — or 32 per cent of the house price.

Monthly costs for homeowners in London are now £1,828 on average, while the average cost of renting in the capital is £2,074 per month which equates to a monthly saving of £246 for owners.

High rents in the capital impact renters’ ability to save a deposit, adding to the difficulties involved in buying a home.

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

“On top of that, landlords are still exiting the sector due to tax changes in recent years and the prospect of more to come.

“Higher supply means lower rents [which] would alleviate some of the pain for tenants,” added Bill.

Across the UK, owning a home is still cheaper than renting — but the gap is closing

The cost of a mortgage on a first home is typically around £42 per month cheaper than renting, but the difference has reduced and in some parts of the UK renting may be the less expensive option.

UK first-time buyers could typically pay around £971 per month for a three-bedroom home, while renters would be spending around £1,013, according to Halifax.

The current difference of around £500 per year between buying and renting is down from a peak reached in 2016, when owners were saving £1,567 annually.

In 2021, buying a home was found to be around £1,300 cheaper per year than renting.

Making the move from renting to home-ownership can be difficult for many, as raising a sufficient deposit and then finding the right property can be challenging

Kim Kinnaird, Halifax

To make the calculations, the bank factored in mortgage payments, household maintenance, repairs, minor alterations and insurance costs for home-owners.

It used its own house price data, mortgage figures from UK Finance, as well as data from the Bank of England and the Office for National Statistics.

For renters, it looked at average rental payments, taking data from BM Solutions, a buy-to-let brand in the same banking group as Halifax.

For most sources, the latest research covered the period to the end of 2022, although a small amount included January 2023.

Researchers assumed different deposit sizes would be put down depending on where in the UK someone was buying a home, but the average deposit size across the UK was 23 per cent, or £64,598.

The UK’s biggest gap between owners and renters, in percentage terms, was in Scotland.

Those renting in Scotland faced paying an average £918 per month, compared with £727 for homeowners — a saving of 21 per cent for those on the property ladder.

At the other end of the spectrum, first-time buyers in the North East need a £32,920 or 19 per cent deposit on average.

The East of England was found to be the only region where it was typically more expensive to buy a first home than rent one.

Homeowners there face paying £90 more each month, on average, than those renting.

Region	Av. monthly homeowning cost	Av. monthly rent payment	Monthly savings for owners	Annual savings for owners
Scotland	£727	£918	£191 (21%)	£2,295
South West	£1,029	£1,237	£208 (17%)	£2,492
North West	£778	£922	£145 (16%)	£1,737
Wales	£735	£872	£137 (16%)	£1,647
London	£1,828	£2,074	£246 (12%)	£2,950
West Midlands	£839	£951	£112 (12%)	£1,342
Yorkshire and the Humber	£720	£802	£82 (10%)	£980
South East	£1,345	£1,474	£129 (9%)	£1,550
East Midlands	£843	£931	£88 (9%)	£1,059
North East	£628	£685	£57 (8%)	£686
Northern Ireland	£596	£620	£24 (4%)	£288
East of England	£1,212	£1,122	-£90 (-8%)	-£1,078
UK	£971	£1,013	£42 (4%)	£498

Sources: Halifax, Birmingham Midshires and ONS

Rising mortgage rates have been pushing up borrowers’ costs, but, as the housing market softens, there have been some indications of house prices coming off their previous record highs.

Kim Kinnaird, mortgages director, Halifax, said: “Our latest analysis shows that becoming a home-owner can bring significant savings for people.

“Of course, making the move from renting to home-ownership can be difficult for many, as raising a sufficient deposit and then finding the right property can be challenging.

“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 that is compounded when rents are high, impacting the ability to save.”