Homeowners Have A Tenth More Spending Power
Halifax has launched a Discretionary Income Review using official statistics from the Office for National Statistics (ONS), the Bank of England and the Council of Mortgage Lenders (CML).
Discretionary income is defined as the income remaining after essential spending on mortgage payments (interest and capital), council tax, food, clothing and bills.
Here are the main findings of Halifax's first Discretionary Income Review which covers the period between March 2008 and March 2009:
- Between March 2008 and March 2009, the average monthly discretionary income of households with a mortgage rose from £892 to £989, an increase of 11 per cent (£97).
- After accounting for taxes and essential household bills, mortgage holders now have 48 per cent of their net monthly income left over - the highest for three years and up from 45 per cent in March 2008.
- The rise in the average mortgage holder's discretionary income has been driven by a sizeable fall in mortgage repayments, which have dropped by 11 per cent (£72) from a monthly average of £664 in March 2008 to £572 in March 2009.
- This decline reflects the significant falls in interest rates over the period with the average mortgage rate falling to 3.83 per cent in March 2009 from 5.80 per cent a year earlier.
- The reduction in mortgage repayments outweighed the rises in the cost of other 'essential' items such as council tax bills and food.
Less Favourable When Rates Rise
Suren Thiru, economist at Halifax, commented: "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 the extra available income to build up their own savings balances or increase debt repayments rather than to boost their spending on the high street."
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