Thursday, August 13, 2009
Category:
Personal Finance Tips
According to new research by Halifax, UK homeowners with a mortgage experienced a rise in spending power during the course of last year.
In fact, their average monthly discretionary income increased from £892 to £989, which equates to £97 or 11 percent. After allowing for taxes and essential bills, mortgage holders are now in a position to spend 48 percent of their net monthly income on ‘non-essential’ items. This represents the highest figure for three years.
Halifax reports that the noteworthy increase in the discretionary income of average mortgage holders has come about as a result of an 11 percent reduction in mortgage repayments between March 2008 and March 2009. This is said to be associated with the substantial interest rate falls during this period. The only other essential item to have experienced a price reduction is reported to be clothing, at minus 6 percent.
Despite lower mortgage repayments, other ‘essential’ items were found to have higher price tags. For example, during the past year utility bills have risen from £91 to £105 per month, which is equivalent to an increase of 15.5 percent. Food prices rank in second place, with an increase of 10.3 percent, thus causing an average sum of £19 to be added to the monthly outlay of households.
Halifax reveals that mortgage holders are in a much better position than other households, thanks to their discretionary income more than doubling the rise recorded across all households. The latter stood at 4.8 percent between March 2008 and March 2009 but the substantial rise in energy costs has left a number of households in ‘fuel poverty’.
Economist at Halifax, Suren Thiru, said: "Over the past year, homeowners with a mortgage have seen their discretionary income rise by more than a tenth on average. 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. Other households have not fared as well with many suffering as a result of the significant increase in fuel bills."
"Clearly, many mortgage holders are benefiting 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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Homeowners who are looking to re-organise their finances could investigate the possibility of taking out a secured loan for debt
consolidation. One of many finance options available, a secured loan could prove particularly beneficial to those with numerous credit or store cards. A secured loan could be used to tie these up into one place, thus leaving the borrower with a single monthly repayment as opposed to juggling several. In addition, this new repayment could even be lower than existing outgoings, in turn freeing up useful money each month. However, when taking out a secured loan for debt consolidation, it must be remembered that consolidating your debt may increase the amount you pay back overall and extend the repayment periods of your debts.
