First-time buyers £64,000 better off than renting after five years

First-time buyers are significantly better off buying than renting over the long term, despite ongoing affordability pressures, according to new research from mortgage and savings platform, Tembo.

The new quarterly index reveals that first-time buyers are on average £7,600 better off after one year and £64,000 better off after five years compared to those who continue renting and invest their deposit elsewhere.

However, the findings also highlight the scale of the challenge facing today's buyers, with rising deposits, stretched borrowing and sharp regional inequalities continuing to hold many back.

Despite stagnant incomes, falling mortgage rates have improved affordability in the short term. The average first-time buyer mortgage rate dropped to 4.48%, its lowest level in more than two years, reducing monthly repayments and bringing housing costs below 30% of income for the third consecutive quarter.

However, upfront costs remain a major obstacle. Saving for a typical deposit now takes over a decade for many buyers, assuming modest saving rates.

At the same time, most buyers are entering the market with existing debt, with 80% carrying an average balance of £9,277 in loans prior to purchase.

The index also reveals significant regional variation in outcomes for first-time buyers.

Glasgow ranks as the most attractive city, combining lower borrowing requirements with strong house price growth. Buyers in Glasgow would be £122,872 better off over five years compared to renting.

London ranks last, with rent consuming over half of income (51%) and loan-to-income ratios reaching 8.3.

While more affordable cities such as Hull, Derby and Stoke offer lower barriers to entry, higher-growth cities like Manchester, Bristol and Edinburgh continue to attract buyers despite greater financial pressure.

Richard Dana, CEO of Tembo, commented: "First-time buyers are facing one of the toughest markets in decades, with higher deposits, rising living costs and stretched borrowing requirements. But what this data shows clearly is that, over time, buying still significantly outperforms renting for most people. Trying to time the market perfectly is incredibly difficult. What matters more is getting on the ladder when you can and staying there. With this new index, we want to give would-be first time buyers clearer, data-driven insights to help them understand their options and make more confident decisions."