New analysis from Lloyds Bank has delivered a stark financial warning for renters across the UK, revealing that renting a property is now £259 more expensive each month than the typical mortgage costs for a first-time buyer.
Affordability Improves for New Buyers
According to the bank's research, the combination of lower interest rates, stronger wage growth, and modest house price increases has improved affordability for those looking to get onto the property ladder. At a national level, the price of a typical first home is now 5.9 times average earnings, a notable drop from 6.2 times recorded last year.
This calculation is based on a typical first-time buyer property costing £237,518, which marks a 2.4% increase over the past twelve months. Meanwhile, average incomes have risen more sharply, climbing by 6.2% to reach £40,021. The last time the property price-to-income ratio for new buyers was below 6.0 was nearly a decade ago, at the end of 2015.
The Growing Cost Gap Between Renting and Buying
The data highlights a rapidly widening gap between the costs of renting and owning. Over the last year, UK rental costs have surged by 5.5% to a monthly average of £1,346. Although strong wage growth has kept rental payments stable at around 40% of income, the disparity with buying has grown substantially.
In contrast, the typical monthly mortgage payment for a first-time buyer has risen by a mere 0.1% to £1,087. This is due to lower interest rates offsetting small increases in property prices. These figures assume a five-year fixed-rate mortgage with a 30-year term and a 10% deposit, where the average rate has fallen from 4.7% to 4.5%.
As a result, mortgage costs now consume 32.6% of an average income, down from 34.6% last year and the lowest proportion since mid-2022.
Regional Variation and Expert Advice
Amanda Bryden, Head of Mortgages at Lloyds Bank, cautioned that the headline national figures don't tell the whole story. "Big national numbers often make the headlines, but the reality is that the housing market can look very different from one town to the next," she said.
Bryden advised potential buyers to consider flexibility on location to find better value. "If you’re searching for your first home, being flexible on location can really help – sometimes moving just a few miles from your preferred area can unlock much better value," she added.
The research underscores a significant shift in the UK housing landscape, where for many, monthly mortgage repayments are becoming increasingly competitive compared to the soaring cost of renting. The £259 monthly gap has expanded by over a third (36%) in just one year, presenting a powerful financial incentive for those able to save a deposit.
