How much does it cost to run a home?

Whether you’re a private tenant or homeowner, rent and mortgage payments are a major monthly outgoing. And that's before you add in your home's running costs. But who is better off?

MORE TH>N, part of RSA Insurance Group, decided to find out.

The first thing they found was that very little quality analysis existed on the total expenses associated of running a home that included mortgage and rent payments. So they enlisted personal finance journalist, Rosanna Spero to help write a Cost of Running a Home report, published on 9 May 2016. The idea was to better understand the pressures their customers faced by accurately quantifying and comparing the overall cost of running a home for renters and homeowners.

Getting the bigger picture

The research was carried out between January and March of 2016 and looked at the costs homeowners and renters living in 72 towns and cities in 12 regions across the UK faced. 

In total, 720 properties spread over five different house sizes–one-bedroom flats to four-bedroom detached houses–were surveyed. 

As well as monthly mortgage and rent payments, the Cost of Running a Home study also took into account: utility bills; water rates; council tax; TV, phone and broadband; contents and buildings insurance; garden maintenance; household furnishings; and general home maintenance.

A nation of stark contrasts

The study’s main finding was that the cost of running a same-sized homes varies significantly depending on which part of the country you live in.

Unsurprisingly, the most expensive area to run a home was Greater London. 72% of rented and owned properties cost £1,827.90 a month to run, making Londoners by far the most stretched. Particularly hard-hit were homeowners in Westminster, where a one-bedroom flat costs on average £4,080.89 a month to run.

Compare that with Omagh in Northern Ireland which emerged as one of the most affordable places to live in in the UK. There, a one-bedroom flat costs just £313.27 a month on average to run and a four-bedroom detached house, £1,380.30.

The report also highlighted that while people tend to think of rent or mortgage payments as the single biggest home-related expense, running costs in fact often amount to the same amount again.

In three towns, Carlisle, Blackpool and Neath Port Talbot, household bills actually cost more than rent. And in other areas, including Richmond, Scarborough, Burnley, Lowestoft and Sunderland, the cost of bills amounted to over 90% of payment.   

Renters or homeowners – who wins?

The average house in the UK has 2.8 bedrooms, so MORE TH>N’s researchers used a three-bedroom house as an indicator of what families across the country were paying every month.

They found that the average running cost of an ‘owned’ three-bedroom home in the UK was £20,000 a year, or £1,634 per month whereas a rented three-bedroom home cost only slightly less at £19,000 a year, or £1,576 a month.

And for the majority of smaller properties (one- and two-bedroom homes), mortgage-holders were better off than renters.

Overall, the Cost of Running a Home study found that for two-thirds of UK residents, it was cheaper to own than rent. Renters only came out on top when living in larger homes with four or more bedrooms.

Percentage of salary spent on running an average UK home*

  • 43%

    for tenants

  • 45%

    for homeowners

  • * Based on two adults earning the UK average yearly take-home salary of £21,935 and living in a three-bedroom home.

Counting the costs

The Cost of Running a Home  study also highlighted that families in the UK are under more pressure than ever to make ends meet.

For example, a household with two working adults each earning the average yearly salary, would spend between 43% (rented) and 45% (owned) of post-tax earnings on household bills andrent or mortgage payments alone. That doesn’t leave much for  food, petrol and ‘luxuries’ like a day out.

How can having insurance help?

Graham Nicholls, head of home insurance at MORE TH>N, commented on what the industry can take away from the report’s findings:

 “The Cost of Running a Home report highlighted two key areas: first, how stretched people are to put a roof over their heads and pay bills; and second, how important it is, especially in lean times, to have the right insurance in place, to guard against unforeseen costs and events.

Whether it’s storm damage, or an ingress of water/burst pipe, when people are already tightly stretched, those extra costs add up.

Graham Nicholls Head of Home Insurance for MORETH>N

How having appropriate insurance can help

As well as having appropriate insurance cover, Graham also advised homeowners not to risk cutting corners.

“That means making sure you’ve carried out proper house repairs and keeping your home well maintained. A slipped tile on a roof can get worse over time if ignored and quickly becomes a larger problem.

“As a home insurer, we’re not liable to cover ware and tear, so it’s important to make sure you deal with small maintenance issues in due time.”