The UK cities where buying a home with a 5% deposit could be less expensive than renting

Buying a house with a mortgage could be cheaper than renting even with low deposits in some of Britain’s major cities, according to analysis by a major bank.

Analysis by Lloyds compared typical monthly rental costs to potential first-time buyer mortgage payments in 11 major cities and found that owning a home in nine of them could cost less than current rental prices.

However, the study is based on certain assumptions, such as that a buyer will have a 5 percent deposit and pay a fixed interest rate of 4.78 percent for five years with a 30-year repayment period. Individual financial circumstances will also naturally change.

For its calculations, Lloyds used Office for National Statistics (ONS) data for average first-time buyer property prices and average rent figures.

While the study examined potential mortgage payments, it did not include costs such as legal fees or other ongoing costs associated with homeownership.

Lloyds said London was excluded from the analysis due to significantly higher property prices and different affordability dynamics.

Based on the average first-time buyer property price of £228,233, the typical 5 per cent deposit needed could be around £11,412, according to the research.

According to the research, among major cities outside London, the biggest gap between owning and renting is in Glasgow; mortgage payments are 32 percent cheaper than rent.

Home buyers could potentially save £396 a month or £4,752 a year compared to renting, according to Lloyds’ calculations.

Considering the average first-time buyer property price is £172,000, a deposit of just £8,600 may be enough for some people to get on the ladder.

Newcastle came second in the savings rankings, with first-time homebuyers paying an average of 20 per cent less on a mortgage than they do on rent, potentially saving £217 per month or £2,604 per year.

With the average first-time buyer property price being £180,000, a £9,000 deposit may be enough for some people to get on the property ladder.

The report suggested that even in cities such as Cardiff and Sheffield, where renting is slightly cheaper in the short term, according to Lloyds research, the long-term benefit of building equity in the property could outweigh the difference.

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Amanda Bryden, head of mortgages at Lloyds, said: “We know saving for a deposit is one of the biggest hurdles for first-time buyers.

“With rents rising sharply over the last two years, many people are currently managing monthly payments that are higher than a typical mortgage.

“That’s why low-deposit mortgages could be the right solution for many people, helping people move from renting to home ownership sooner than they think.

“It is also important to consider other up-front costs such as legal fees and moving costs, but for most people the long-term savings will outweigh these.”

While buying is cheaper than renting in some cases, some people may prefer to rent for reasons such as having more flexibility and being able to move around for work.

Ms Bryden added: “The impact of increased equity in your own home – money that would otherwise be lost in rent – ​​means a more secure financial future.

“For anyone considering buying, speaking to a mortgage advisor or broker is a great first step.”

Lloyds analysis of 11 major cities

According to Lloyds’ calculations, average first-time home buyers’ prices are followed by the typical amount required for a 5 per cent deposit, monthly mortgage cost, monthly rent, percentage savings from having a mortgage rather than renting, monthly savings and annual savings:

Where negative figures were shown, renting was found to be cheaper than mortgage payments.