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Homeowners increase spending power

Homeowners increase spending power

Category: Money

Updated: 03/08/2009
First Published: 03/08/2009

This article was correct at the time of publication. It is now over 6 months old so the content may be out of date.

Homeowners in the UK with a mortgage have seen their spending power increase by over ten per cent over the last 12 months, new research has found.

In the 12 months to March this year, the average monthly discretionary income for households with a mortgage rose by £97, from £892 to £989 – a rise of 11 per cent, according to Halifax.

The rise in discretionary income has been driven by falling interest repayments, which have dropped by 11 per cent over the 12 months to March, from £664 to £572. This contraction has far outweighed rises in costs of other essential items, such as food and utility bills.

After taxes and essential bills are paid, mortgage holders now have almost half (48 per cent) of their net monthly income for non essential purchases – the highest proportion recorded in three years.

"The considerable fall in mortgage repayments over the period has been a key factor behind the increase, providing a timely boost to mortgage holders' spending power," said Suren Thiru, economist at Halifax.

"Clearly, many mortgage holders are benefitting from record low interest rates and the situation will be less favourable when rates eventually begin to rise.

"Also, with the outlook for the UK economy remaining highly uncertain, many homeowners may choose to utilise extra available income to build up their own savings balances or increase debt repayments, rather than boost their spending on the high street."

Private renters saw only a slight change in their level of monthly discretional income, rising by just £801 to £804 in the 12 months to March.

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