Annual cost of owning and running a home rises by 179

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1 NOT FOR BROADCAST OR PUBLICATION BEFORE HRS WEDNESDAY 3 RD APRIL 2013 This is the annual Halifax 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, DCLG and Halifax's own extensive housing database. Housing costs include mortgage payments (interest and capital repayments), council tax, spending on maintenance and repair, water supply, electricity, gas and other fuels, household appliances, tools and equipment, goods and services for routine household maintenance, telephone accounts, toiletries, and household insurance. Annual cost of owning and running a home rises by 179 Water bills 5.6% higher; electricity & gas up 4.2% Electricity & gas bills up 626 a year since 2008 The annual expense of owning and running a house has increased by 179 over the past year, according to new research by Halifax. The typical annual cost associated with owning and running a home in the UK has risen by 1.9% from 9,411 in 2012 to 9, The increase was, however, less than the 2.7% rise in consumer prices over the same period. This was the third successive annual increase in the cost of owning a home following the decline recorded between 2008 and 2010, which was driven by the reduction in mortgage rates during this period. Overall, the average annual costs of owning and running a home are now 2.0% ( 184) higher than five years' ago. This increase is significantly lower than the 18% increase in overall consumer prices since Water and fuel bills have risen most in percentage terms Water bills have increased by an average 5.6% ( 27) over the past year. The next biggest percentage rise was in electricity and gas bills, which increased by an average of 4.2% ( 70). Six of the 11 housing expense categories tracked have risen in cost over the past year. (Table 1) Home running costs have risen across all UK regions in the last 12 months Housing costs have risen in all UK regions in the past year. Nonetheless, only two regions Northern Ireland (4.8%) and Wales (4.1%) saw costs rise at a faster rate than consumer 1

2 price inflation (3.3%). Those living in the East Midlands (2.0%) and London (2.0%) saw the smallest rises. (Table 2) Total annual costs of owning and running a home are highest in London, at 12,094. This is 26% ( 2,504) above the UK average and 52% ( 4,124) higher than in Northern Ireland ( 7,970), which has the lowest costs Mortgage payments have fallen by nearly a quarter since 2008 The average annual mortgage payment has fallen by 950 (21%) over the past five years from 4,521 in 2008 to 3,571 in This decline largely reflects the fall in mortgage rates since offsetting most of the rising cost of all other housing expense categories In contrast, the cost of each of the other 10 housing expenditure categories tracked has risen since Electricity and gas bills have risen most (up by 57%, or 626 a year), followed by home and garden tools (25%) and water supply and miscellaneous dwelling services (22%). reducing mortgage payments' share of total housing costs As a result, mortgage payments have dropped significantly as a share of total housing costs since 2008 from 48% to 37% in In contrast, the share of electricity and gas bills has risen from 12% to 18%. although they remain the biggest single component Nonetheless, mortgage payments remain the largest single component of housing expenses (37%). Electricity and gas charges account for the second highest share (18%), followed by council tax payments (14%). (Table 3) Martin Ellis, housing economist at Halifax, comments: "The typical costs of owning and running a home have again increased slightly over the past year, although this rise was below the general increase in the cost of living. "Overall, the cost of owning a home has increased by 2% over the past five years, representing a significant decline in real terms. Lower mortgage payments have largely offset increases in other items of housing-related expenditure, such as the substantial rises in electricity and gas bills." 2

3 Table 1: Cost of Owning and Running a House by category, Jan Jan 2013 Jan 2008 Jan 2012 Jan year % 5 year % Maintenance and repair of dwelling % 19% Water supply and miscellaneous dwelling services % 22% Electricity, gas and other fuels 1,101 1,657 1, % 57% Household appliances % 11% Tools and equipment for house and garden % 25% Goods and services for routine household maintenance % 19% Telephone account % 14% Toiletries, cleaning products, etc % 10% Household insurances % 1% Mortgage payments (capital and interest) 2 4,521 3,493 3, % -21% Council tax 1,271 1,378 1, % 9% Total Cost of Owning and running a home 9,406 9,411 9, % 2.0% Table 2: Cost of Owning and Running a House by Region, Jan Jan 2013 Jan 2008 Jan 2012 Jan year % 5 year % North East 7,712 7,987 8, % 5.8% North West 8,558 8,837 9, % 5.4% Yorkshire & the Humber 8,027 8,325 8, % 5.9% East Midlands 8,722 8,887 9, % 4.9% West Midlands 8,376 8,597 8, % 4.8% East 10,122 10,176 10, % 2.7% Greater London 12,124 11,850 12, % -0.2% South East 10,786 10,754 10, % 1.8% South West 9,086 9,321 9, % 2.8% Wales 7,454 7,907 8, % 8.6% Scotland 8,455 8,532 8, % 3.0% Northern Ireland 7,311 7,800 7, % 9.0% UK 9,406 9,411 9, % 2.0% 3

4 Table 3: Share of total housing costs by category Jan 08 Jan 13 Maintenance and repair of dwelling 6% 7% Water supply and miscellaneous dwelling services 4% 5% Electricity, gas and other fuels 12% 18% Household appliances 2% 2% Tools and equipment for house and garden 2% 2% Goods and services for routine household maintenance 3% 4% Telephone account 3% 4% Toiletries, cleaning products, etc 2% 2% Household insurances 4% 4% Mortgage payments (capital and interest) 48% 37% Council tax, domestic rates 14% 14% Total Cost of Owning and running a home 100% 100% Sources for all tables: Halifax, ONS Editors' Notes: 1 in January Average mortgage payments have increased by 2.2% over the past year. This is due to a rise (2.3%) in the average outstanding mortgage balance as total balances have risen (1.4%) whilst the number of borrowers has fallen (-0.9%). Data Sources: Mortgage payments: The weighted average of repayment (capital and interest) and interest-only mortgage payments. Weights have been constructed using FSA regulated mortgage statistics on balances by mortgage type. Mortgage interest rates: Monthly average of UK resident banks' sterling weighted average interest rate loans secured on dwellings to households for existing borrowers only (not seasonally adjusted). Data series published by the Bank of England (code: CFMHSDE). From January 2010, building society rates are included within the overall rate for UK MFIs. 4

5 Methodology: This housing cost research has been compiled using consumer spending data for households that are owner-occupiers. Owner-occupied housing spending data has been extracted from the ONS Family Spending Survey for the period 2001/02 to 2004/05. This data has been used to construct base weights and levels of owner occupied home owning and running costs. Price rises from equivalent Consumer Price Index and Retail Price Index categories has then been applied to these base weights to calculate the in and current level of owner-occupied home owning and running costs. The price rise in the repayment mortgage component of mortgage payments (see above) is calculated using Bank of England series on outstanding mortgage balances and monthly average of UK resident banks' sterling weighted average interest rate loans secured on dwellings to households for existing borrowers only. Council tax bills are based on data from the DCLG, Scottish Executive, Welsh Assembly and the Northern Ireland Neighbourhood Information Service. The data refers to average Band D council tax bills with the exception of Northern Ireland which refers to the average rates bill. The UK estimate is a weighted average of the region data. Weights have been calculated using owner occupancy data. Utility bills are based on spending patterns of owner occupiers in the Family Spending Survey and relate to owner occupied households and therefore may be larger than equivalent bills for all households because of the typically larger size of owner occupied properties. Housing Economics Helpline No: housingeconomics@lloydsbanking.com "This report is prepared from information that we believe is collated with care, however, it is only intended to highlight issues and it is not intended to be comprehensive. We reserve the right to vary our methodology and to edit or discontinue/withdraw this, or any other report. Any use of this report for an individual's own or third party commercial purposes is done entirely at the risk of the person making such use and solely the responsibility of the person or persons making such reliance. " Bank of Scotland plc all rights reserved