COST OF OWNING A HOME IN BRITAIN RISES BY 7%
(8 March 2006)

The cost of owning and running a house rose by 7% in the financial year 2004/05, more than three times the rate of CPI inflation*, according to new research by Halifax based on the latest ONS data. This is the fourth Halifax annual review of the cost of owning and running a home. The review is compiled using a range of official statistics, including the ONS Family Spending Survey. Halifax is the UK's biggest mortgage lender and also publishes the longest running monthly house price index in the UK.

The 7% increase was the second successive annual increase above the rate of inflation. Over the past three years, the total costs of housing have increased by 14%, far outpacing the 4.6% rise in inflation over the period.

COUNCIL TAX & FUEL BILLS OUTSTRIP MORTGAGE PAYMENTS

For the first time since Halifax has issued this survey, council tax and utility bills combined are estimated to represent the single biggest component of total costs in 2005/06. They should therefore account for a higher proportion of the overall costs than mortgage payments.

LONDON HOMES COST 28% ABOVE NATIONAL AVERAGE

The costs of owning and running a home vary widely across the country. At £8,133 per year, London housing costs are the highest. Costs in the capital are 63% above the annual housing costs in the North East, the cheapest region at £4,990 per year. The capital's costs are 28% above the national average.

There is, however, significantly less variation once differences in incomes are taken into account. The East of England has the highest housing costs relative to household income, at 18.6% of gross disposable income, whilst costs remain lowest in the North East at 16.0% of gross disposable income.

HIGHER MORTAGE RATES BOOST COSTS IN 2004/05

Total annual housing costs increased by £418 from £5,948 in 2003/04 to £6,366 in 2004/05. Higher mortgage interest payments contributed the most to the increase in the cost of owning and running a house in 2004/05 - rising by 20% to an average of £2,146. (The average mortgage rate in 2004/05 was 5.4% compared with 4.4% in 2003/04.)

Halifax estimates that higher fuel and council tax bills will more than offset lower mortgage costs in the current financial year, pushing up the costs of running a home in 2005/06. Additionally, both council tax and utility bills are expected to rise by well above inflation in 2006. For example, the UK's biggest energy supplier, British Gas, increased gas and electricity tariffs by 22% on 1 March 2006. Council tax bills in England are set to increase by 4.5% in April, more than double the rate of inflation, according to a survey conducted by CIPFA. Council tax and utility bills are set to represent 35-36% of total housing costs in 2006/07.

Other key findings:

• Annual housing costs, at £6,366, make up 23% of total household spending by owner occupiers and are one-third more than household spending on the essential items of food & drink, clothing, education and healthcare.
  
  
• Average annual housing expenses for homeowners exceed £5,500 in nine regions of the UK. Housing costs are highest in London at £8,133. Only three regions have annual housing costs below £5,500 - Wales (£5,127) and Northern Ireland (£5,064) with the North East experiencing the lowest housing costs just below £5,000 at £4,990 a year. (See Table 1)
  
  
• For the average UK homeowner, housing expenses take up 17.5% of their income. Housing related expenditure relative to income is highest in the East, accounting for almost 18.6% of gross household income closely followed by the South East 18.0%. Costs are lowest in relation to income in the North East at 16.0% of gross disposable income. (See Table 2)
  
  
• At £2,146, mortgage interest costs account for 34% of the annual costs of owning and running a household, the largest single expense. In London mortgage interest payments account for 39% of total housing costs, the highest proportion of any region, while Northern Ireland has the lowest proportion representing 27% of total housing costs. (See Table 3)
  
  
• Both water supply and electricity, gas and other fuels expenditure increased by 6% in 2004/05 and accounted for 15% of the 7% increase in total housing costs for the year. Rising oil prices pushed these costs higher.
  
  
• Council tax contributed to the increase in the cost of owning and running a house in 2004/05 - expenditure on council tax increased by 8% to an average of £998. Council tax made up 16% of the cost of owning and operating a household in 2004/05. London homeowners paid the most council tax, £1,155 per year.

A BREAKDOWN OF THE COST OF OWNING A HOME

(Source: ONS Family Spending Survey financial year 2004/05)

Table 1 - Housing Expenditure by region- Owner occupiers

Table 2 - Housing Expenditure as a percentage of income
- Owner occupiers

Table 3- Mortgage Interest Payment expenses by region
- Owner occupiers

* Note this figure may differ from government data on average council tax expenditure as quoted data is for owner occupiers only and is sourced from the Family Spending survey.

Table 4- Housing expenditure versus "Essential" Spending
- Owner occupiers

*CPI inflation - the government's preferred inflation measure - year to March 2005 of 1.9%.

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