New analysis from mortgage lender Perenna shows that first time buyers are paying 40% more in rent prior to purchase than those in 2015. The figures show that the cost of rent pre-purchase has risen by £46,621 to 163,047, up from £116,427 a decade ago.
The findings show that the average first time buyer spends 12.8 years paying rent before purchase, up from 11.4 years in 2015. Comparing this data with the cost of rent over the past 20 years, Perenna analysis showed that buyers are spending significantly more time and money renting before purchasing, severely impacting their ability to get onto the housing ladder.
The average UK house price is £268,652, meaning that a 10% deposit would require £26,865. With the extra money spent on rent, the research shows that without this increased cost, first time buyers would have had the opportunity to save for a deposit on an average UK house.
Colin Bell, COO and Founder of Perenna, said: “There is a time and a place for renting. While some may make the personal choice to rent in the long term, others are forced into a seemingly never-ending cycle of rising costs. The current infrastructure of the property market means we’re encouraging our young people to get trapped into long-term renting over purchasing a home.
“Renting is ultimately money spent without return. Unlike mortgage payments, which include a capital element (savings) and build equity, rent offers no stake in the property and often doesn’t even strengthen someone’s credit profile — despite renters frequently paying more each month than they would with a mortgage. With house prices increasing overall, they could have spent their hard-earned money on an appreciating asset, but the market is failing to provide the right financial mechanisms to help lift buyers onto the ladder.
“Let’s stop obsessing over interest rates which have little bearing on whether people can own a home. Instead, we should get building, roll out more low-deposit solutions, evolve the regulations to favour mortgage innovation, and get homes into the hands of our young people. We need to act now, with the support of regulators, the government and the wider private market, to roll out the solutions necessary to ensure we’re not in the same position in 2035.”
