First-time buyers could save thousands of pounds a year by purchasing rather than renting, even with a 5% deposit, according to new analysis from Lloyds Banking Group.
Across the UK, average monthly mortgage payments for first-time buyers are now typically 17% lower than the cost of renting equivalent properties. Based on an average first-time buyer home costing £228,233, a 5% deposit of £11,412 would secure a mortgage that works out around £225 a month cheaper than renting.
In nine of 11 major cities outside London, owning a home was found to be more cost-effective than renting, the study showed.
THE WIDEST GAPS
The biggest difference was in Glasgow, where a first-time buyer could save £396 a month – or £4,752 a year – compared with renting. Newcastle, Edinburgh, Bristol and Manchester also offered notable advantages, with monthly savings of between £150 and £230.
The analysis, based on a 4.78% five-year fixed rate over a 30-year term, suggests that while raising a deposit remains the biggest obstacle to homeownership, the long-term financial case for buying continues to strengthen.
In Nottingham and Leeds, mortgage costs were only marginally below rental prices, while in Cardiff and Sheffield renting was found to be slightly cheaper each month.
BUILDING EQUITY
When factoring in the value of equity built up over time, Lloyds found that homeowners are significantly better off than renters. A first-time buyer putting down a 5% deposit could be more than £20,000 better off after five years, combining lower monthly payments with equity gains.
In Glasgow, that figure rises to almost £29,000, while in Bristol it reaches around £23,000. Even in areas where renting is marginally cheaper, the potential for long-term equity growth was found to outweigh short-term rental savings.
LOW-DEPOSIT OPTIONS
Amanda Bryden, head of mortgages at Lloyds, said: “We know that saving for a deposit is one of the biggest hurdles for first-time buyers. With rents having risen sharply over the last two years, many are already managing monthly payments that are higher than a typical mortgage.
“That’s why low-deposit mortgages could be the right solution for many – helping people move from renting to owning sooner than they thought possible.”
She added that buying remains one of the strongest long-term financial decisions most people can make, providing both cost stability and the opportunity to build wealth over time.
UPFRONT COSTS
Mary-Lou Press, president of NAEA Propertymark, cautioned that while low-deposit products are widening access to the market, buyers still face substantial initial costs.
“Recent changes to stamp duty in England and Northern Ireland mean that some first-time buyers will also now have additional tax to pay,” she said.
“Beyond the deposit and any relevant property tax, buyers must also budget for solicitor fees, mortgage arrangement charges, valuation and survey costs, local authority searches, moving expenses and insurances.
“In many cases, these additional costs can amount to several thousand pounds, making the initial outlay far higher than just the deposit alone.”
She added: “That said, in some areas, we are seeing that monthly mortgage repayments can still be lower than local rents, especially for buyers securing competitive rates. But affordability must be assessed holistically.
“First-time buyers need to go in with a clear understanding of both the upfront and ongoing costs of ownership to make an informed decision.”
According to Lloyds, the savings for first-time buyers compared with renters are currently greatest in Glasgow, Newcastle and Edinburgh.
