Mortgage holders have 11% more spare cash

| August 4, 2009 | 0 Comments
Mortgage holders have 11% more spare cash

Homeowners with a mortgage have seen their spending power rise by more than one tenth in the past year, Halifax revealed this week.

Mortgage holders now have more money left over after buying the essentials than they have done for years.

Since March 2008, the average household with a mortgage has seen their discretionary income increase 11% from £892 to £989, Halifax said.

This is equivalent to 48% of their monthly income, compared with 45% in March 2008.

A nosedive in mortgage costs has driven the increase, Halifax said, with the average interest rate falling from 5.8% to 3.8% in the past year.

“Over the past year, homeowners with a mortgage have seen their discretionary income rise by more than a tenth on average,” said Suren Thiru, Halifax economist.

“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.”

Plummeting mortgage payments have masked an increase in food costs and utility bills.

Food prices have increased 10.3% in the past year, while utility bills have risen 15.5%.

“The situation will be less favourable when rates eventually begin to rise,” Thiru said.

Thiru advised homeowners to use their extra cash to pay off debts or top up savings.

“With the outlook for the UK economy remaining highly uncertain, many homeowners may choose to use extra available income to build up their own savings balances or increase debt repayments, rather than boost their spending on the high street,” Thiru said.

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