It is now no longer significantly cheaper to rent than buy, in terms of monthly outgoings, new analysis by RightMove has shown.
While average monthly mortgage payments (£901) outpace average monthly rental payments (£887), the gap in payments has slimmed over the past decade.
The property platform’s new analysis tracking first-time buyer affordability is based on a household withdrawing a 90 per cent loan-to-value mortgage, at the average two-year fixed interest rate.
Rightmove has also found that a couple buying on an average salary should still be able to afford a first-time buyer home if they have saved a 10 per cent deposit. However, the size of the deposit has surged from £14,269 to £22,312, a jump of 56 per cent, versus a decade ago.
An individual on an average salary would need a deposit 112 per cent higher than ten years ago, to buy on their own.
“This new analysis shows how it has become increasingly difficult for an average first-time buyer to afford a home on their own,” Tim Bannister, Rightmove’s director of property science, said.
He added: “The historic average mortgage payments for a first home provide some good context to the current backdrop of rising interest rates and help explain why so many people take out fixed-rate mortgages.
“As interest rates are predicted to rise further during the course of 2022, many buyers will be looking to lock in mortgage deals now before further rate rises.”
Monthly rental payments have risen by 40 per cent in a decade, currently growing at the fastest pace Rightmove has ever recorded.
It comes as buyers are facing average prices £55,000 higher than before the pandemic, two years ago.
Just before the pandemic, buyers had only noted a rise of £6,000, compared to the two years prior.
According to Rightmove’s monthly house price index, buyers face an average price tag of £367,501. This is a 2.1 per cent jump – worth £7,400 – compared to the month prior.
There are signs that frenzied demand may be starting to let up, the property platform asserted in fresh data published this morning.
The number of buyers approaching estate agents is down 14 per cent year-on-year, although the level is still almost one third higher than the 2019 market.
What’s more, the number of available properties on the market is also down 16 per cent compared to last year.
“House prices have been soaring throughout the pandemic, but it looks as though the market has reached its Icarus moment, with buyer demand starting to come off the boil when compared to this time last year,” director of Benham and Reeves, Marc von Grundherr, said.
He added: “It’s unlikely that we will now see demand and property values come plummeting back to earth with a thud, but we do expect that a more muted market performance lies ahead, as buyers face the reality of rising interest rates and wider economic instability.”