Pepper Money has published its first-time buyer index, analysing locations across the UK to identify where purchasing a property could be a more cost-effective option than renting.
Through the use of Office for National Statistics (ONS) data on first-time buyer costs and rental prices, Pepper Money found that the average price of homes is around £261,700 for those getting on the property ladder, compared to average rents for a three-bed property across the UK, which are around £1,269 monthly.
The study shows that 41% of areas across the UK are better to buy in than to rent. When analysing the cheapest first-time buyer homes across England and Wales, 187 locations had an average price less than the UK average of £261,700.
The best locations for first-time buyers
Across all factors, including property prices, rental costs, mortgage affordability and median earnings, Middlesbrough was ranked as the top location for first-time buyers. It scored highly thanks to its lower-than-average house prices of £123,831, resulting in more affordable mortgage payments of around £607 per month.
The area also performed strongly on affordability, with local earnings showing a more favourable balance relative to property prices, helping buyers build towards a deposit more quickly.
Burnley ranked second, offering the lowest average deposit requirement across the index at £11,595. Buyers in the area could also save more than £100 per month compared with renting. Merthyr Tydfil in Wales completed the top three, ranking highly due to the affordability of local property prices when compared with average earnings
Five regions feature in the index's top 10 across all factors. The North East, North West, Wales, South East, and West Midlands all have areas sitting below the national first-time buyer average property price. Even the priciest entry on the list, Southampton and Gosport at around £207,000, comes in 21% below the national figure.
Nine of the ten areas have mortgages cheaper than local rent. Rugby is the only exception, where renting is £44 a month cheaper, though the area has exceptionally high earnings of over £41,000 and a low house price-to-earnings ratio, meaning it keeps its place in the top 10. Out of the top 10, Southampton generates the largest annual saving of any area at £3,924 a year, or £327 a month.
The North offers the most accessible areas for first-time buyers
The North East was ranked the best region to purchase as a first-time buyer, with four areas in the top 10. The North West has three areas in the top 10, including Burnley, which accounts for the cheapest average starter home at an average house price of £115,953.
This is followed by Hartlepool at £118,879 and the rest of County Durham at £120,933. Middlesbrough and Blackpool round out the top five with average house prices of £123,831 and £126,193 respectively. Kingston Upon Hull ranks sixth at £127,148, followed by Sunderland at £129,230 and Hyndburn at £129,342, with Welsh areas Blaenau Gwent and Merthyr Tydfil closing the top 10 at £131,189 and £132,288 respectively.
The North as a whole performed well across the whole index, offering smaller house prices and easier deposits for prospective house buyers to save for. 13 out of the top 20 areas were from the North West or North East.
The North East was also ranked the best region overall for buying instead of renting, as every single area in the North East except Northumberland has a cheaper monthly mortgage than local rent. The average mortgage across the region is just £699 a month, against a national average of £1,310, with the average property price sitting just under £143,000. In County Durham, Middlesbrough and Hartlepool, a mortgage takes up just 24% of monthly earnings.
69% of areas in the North West, including Burnley, Hyndburn, Blackpool and Liverpool, have mortgages cheaper than local rent. However, there are still some expensive areas in the region, including Cheshire East, Ribble Valley, Trafford, Stockport, and Warrington. Trafford, for example, has an average price of £306,330.
Pepper Money flags Manchester and Salford as amongst the surprising areas in the region to save, due to city rents being so elevated. Despite relatively high average house prices, £232,888 and £204,756 respectively, both cities generate over £3,000 a year in savings by switching from renting to buying. Manchester's average rent is £1,406 a month, but an average mortgage is only £1,142.
