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Figures show that it is still cheaper for first-time buyers to rent a home than buy one, despite a significant drop in house prices last year.
According to propertyfinder.com, houses prices are at their lowest level for five years after a 16% reduction in value, but high mortgage rates for first time buyers has meant they are still priced out of the market.
Figures show it would be cheaper for people to buy rather than rent a home in 95% of the country if buyers were given the best borrowing rates, but these are restricted to people with a deposit of at least 40%.
Propertyfinder.com found just three mortgage lenders offering home loans to people with only a 5% deposit, but these charge rate of 7%, compared with 3.39% for someone with 20% deposit.
As a result, homeowners with a typical £150,000 mortgage over 25 years, with a 5% deposit, would have to pay £1,081.34 a month, compared with £749.39 for people qualifying for the 3.39% deal.
Nicholas Leeming, director of propertyfinder.com, said: "First-time buyers are the bedrock of the housing market.
"Lenders are squeezing the life out of the housing market with the extortionate mortgage rates they are demanding from those wanting to get on the ladder.
"Thousands are champing at the bit to take advantage of lower house prices, but simply can't get a mortgage. It's no wonder first-time buyers are now an endangered species."
According to a study, Hounslow in London is the best value area for a first-time buyer. A comparison of 110,000 homes to rent and buy showed that it was £518 a month cheaper to buy a two-bedroom property in Hounslow than to rent one.
The next best place to buy was Newham in east London where people could save £394 a month if they bought instead of rented, followed by Sutton, Surrey, where they save £378 a month.
However, some of Britain's beauty spots bucked this trend, making it cheaper to rent than buy. Renters in north Devon could expect to save £389 a month, and in Restormel, in Cornwall, it is £373 cheaper.
Copyright © Press Association 2009
