More than half of first-time buyers now face higher monthly mortgage payments than their previous rent, according to new research.
Hamptons found that 56% of first-time buyers who purchased in September took on mortgage payments above their previous rental costs. That compares with just 33% in September 2022.
The proportion is now at its highest level in at least a decade. Higher borrowing costs have changed the financial calculation for tenants looking to buy.
According to Hamptons, the average monthly mortgage payment for former renters reached £1,227 in September.
Buyers now pay an average of £1.09 in mortgage repayments for every £1 they previously spent on rent.
By contrast, in September 2022, buyers paid just 90p in mortgage repayments for every £1 of rent.
The shift has been relatively recent. As recently as July, fewer than half (47%) of first-time buyers faced higher monthly costs after purchasing.
Deposit size makes a difference
Hamptons found that deposit size plays a significant role in determining whether buying costs more than renting.
Buyers facing higher mortgage payments purchased with an average deposit of 9%, equivalent to a 91% loan-to-value mortgage.
Meanwhile, those whose mortgage payments fell below their previous rent typically put down a 17% deposit.
Older first-time buyers face the biggest increases.
In September, 67% of buyers in their 40s took on mortgage payments above their previous rent. Their monthly costs were 18.2% higher on average.
Among buyers in their 30s, 58% faced higher payments, with an average increase of 6.9%.
However, buyers in their 20s fared better. Fewer than half (47%) paid more after buying. Their average monthly mortgage costs were 7.5% below their previous rent.
Hamptons said older buyers often purchase larger properties and take shorter mortgage terms.
Those in their 40s typically borrowed over 27 years. This compares with 31 years for buyers in their 30s and 34 years for those in their 20s.
Rental growth accelerates for tenth consecutive month
Meanwhile, rents on newly let properties continue to rise.
Annual rental growth across Great Britain reached 2.7% in September, its fastest pace since November 2024.
The average monthly rent for a newly let home increased to £1,433, up from £1,396 a year earlier.
Rental growth has now accelerated for ten consecutive months.
The South East recorded a 4.6% annual increase, while rents in the South West rose 4.1%. Both regions exceeded 4% growth for the first time since September 2024.
In Greater London, annual growth remained more subdued at 1.5%, taking average new-let rents to £2,357.
However, rental growth across all tenancies continued to slow.
Average rents across the entire rental stock rose 1.9% annually, down from 3.9% a year earlier.
For existing tenants who experienced a rent increase, the average rise was 5.6%. In Scotland, the figure reached 6.9%.
‘Higher mortgage rates have turned that equation on its head’
Aneisha Beveridge, head of research at Hamptons, said: “When interest rates were low, the financial case for tenants to buy as soon as they could was fairly straightforward. Saving a deposit was difficult, but buying usually brought an immediate fall in monthly housing costs, alongside the chance to fix those costs for longer. Higher mortgage rates have turned that equation on its head.
“Today, more than half of renters who buy are taking on a higher monthly payment than the rent they have left behind. The long-term benefits of home ownership – building equity, greater security and eventually owning a home outright – remain, but the immediate monthly saving that once rewarded tenants for making the leap has largely disappeared.
“Meanwhile, rental growth on newly let homes continues to gather pace, with the acceleration now spread fairly evenly across markets outside the capital. So far this year, higher rents have mainly been felt by tenants moving home. But if growth continues to pick up, it is likely to feed through to more existing tenants in the coming months as the gap between new and existing rents widens.”
