In recent years, it was always assumed that renting was considerably more expensive than buying. However, even though rents have been seeing some eye-watering rises, the constant increases in the base rate have substantially reduced the gap.

The most up-to-date figures (from Halifax) compared the cost of renting a 3-bed house to the cost of buying it for a first-time buyer. They found that, over the previous 12 months, the average renters’ costs had increased by £139 to £1,103 per month. The average buyers’ costs, on the other hand, had gone up by as much as £205 to £971 per month. It means the gap has come down from 12% last year to 4%, with an average difference of just £42 per month. Back in 2016, the difference was £130 per month.

If you look at affordability rather than pure monetary figures – first-time buyers, with all their extra costs, tend to spend a far greater proportion of their income on their new homes than average renters. In the UK, rent typically accounts for around 28.3% of average pre-tax earnings, whereas first-time buyers are spending 39% of their take-home pay on their mortgages (Source: Nationwide).

And since the data was released, the base rate has gone up from 4% to 5.25%, mortgage costs have soared and confidence in the housing market has taken a knock. Unsurprisingly, it has led to serious changes in the buying behaviour of renters, many of whom are now putting off their plans for owning their own homes. A survey by The Mortgage Lenders (TML) revealed one in five (19%) say mortgage costs are now so high they can no longer afford to buy, and a further 12% said they were going to have to wait for house prices to fall before making a move. Waiting was a common theme, with 10% deciding they would sit tight until mortgage rates came down and 6% waiting to see what the Bank of England would do at their next policy meeting.

Steve Griffiths, Chief Commercial Officer at TML says:

“The journey to buying a property can be a long one, and it can easily be complicated by the ebbs and flows of the housing market, particularly when we consider the current landscape.”

TML’s survey has revealed the kinds of numbers that could have far-reaching implications for the property market. First-time buyers are some of the key drivers of property sales, generating buying and selling activity all the way up the chain. Only a few years ago, as many as 62% of tenants (2.8 million households) were expecting, at some point, to buy their first home. If a substantial proportion instead chooses to remain in the rental sector, it will not only reduce the number of buyers (and prices) in the sales market, it will also increase demand (and rents) in the lettings sector.

The balance between the cost of renting and buying, though, could soon be heading in the opposite direction if, as seems likely, house prices or the base rate come down in any meaningful way. It’s also possible they will both do so at the same time, which would substantially improve the affordability of buying and running a new home. In the meantime, any renters unwilling to put their buying aspirations on hold are currently either having to look further afield for their ‘dream’ home or are settling for something that is either smaller or needs work. A few of the more switched-on tenants are even offering to buy their rental properties from their landlords if they are struggling with higher mortgage costs.