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Market Insight

Charting the market
Spring 2024

With rents continuing to grow (albeit more slowly than last year) and mortgage rates falling, the monthly cost difference between buying and renting appears to have returned back in favour of buying.

In February, the average first-time buyer would find themselves £136 better off every month by purchasing a home with a 10% deposit than renting. This is despite the average mortgage rate on a 2-year fixed 90% LTV loan remaining above 5%.

While there are other costs associated with buying, not least the need to save up for a deposit, the stability of ownership and longer-term prospect of equity growth remain a key driver.

In their bid to escape rising rents, first-time buyers have made up a record 33% of all buyers so far this year, up from 23% pre-pandemic. Affordability pressures are also squeezing the budgets of upsizers, in many circumstances prompting them to opt for smaller homes.

This means that flat prices have staged somewhat of a recovery, rising faster than the value of smaller homes across 36% of the local authorities nationally.

The move to a higher interest rate era has meant that first-time buyers need to put down bigger deposits than before, in order to meet a lender's affordability criteria.

According to UK Finance data, the average first-time buyer put down a 25% deposit last year, up from 23% in 2019. In London, where affordability is tightest, the typical first-time buyer is having to put down 33%.

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