The cost of buying a home for first-time buyers is more than £100 a month lower than renting, according to new research by Halifax.

This latest Halifax Buying vs. Renting Review tracks changes in the cost of buying and renting a typical two bedroom flat for a first time buyer across the UK over the last three years. Average buying costs include mortgage payments, income lost by funding a deposit rather than saving and spending on household maintenance and repair and insurance costs. Figures relate to the first year of purchase.

The average monthly costs associated with buying a two bedroom flat in the UK for a first-time buyer totalled £567 in July 2011, 16% (£110) lower than the typical rent paid on the same property type (£677 a month). This is in contrast to 2008 when the average cost of buying was in fact 29% (£212) more than the average rent paid.

Since 2008, the cost associated with getting onto the property ladder has fallen by 40% (£383), five times the 8% (£62) decline in the average rent paid by private tenants. The cost of buying for a first time buyer has fallen by 2% over the past year whilst average rental costs have risen by 6%.

The decline in buying costs for a first time buyer has been driven by the fall in mortgage rates and house prices since 2008. The average mortgage rate for a new borrower stands at 3.84%: a fall of 207 basis points from an average of 5.91% in mid 2008. The average first time buyer house price has fallen by 14% to £124,378 over the same period.

First time buyers put down an average deposit of £27,127 in July 2011, equivalent to 20% of the average property price. This is 6% lower than the average of £28,751 in July 2008, revealing a small improvement over the period.

Although the transaction costs associated with home purchase including stamp duty and legal fees can also add to the overall cost of buying a property, Halifax estimates that 95% of first time buyers are currently exempt from paying stamp duty. This is as a consequence of the temporary increase in the threshold for first time buyers from £125,000 to £250,000.

Despite the improvement in the affordability of buying relative to renting, figures from the Council of Mortgage Lenders show that there were 84,000 first-time buyers in the first half of 2011, 23% lower than in the same period in 2008. This partly reflects the economic turbulence over the period and the size of the average deposit still required to get onto the property ladder.

Halifax estimates that the cost of buying would be broadly in line with the cost of renting if the current level of Bank Rate rose by 1.5 percentage points. In this scenario, monthly buying costs for a UK first time buyer would stand at £681: that would be 1% (£4) higher than the average rent paid.

Suren Thiru, housing economist at Halifax, said: “The recent decline in the cost of buying a property for first-time buyers compared to renting has been substantial and reflects the drop in both mortgage rates and house prices since 2008 as well as a marked increase in the average rent paid over the past year.