Mortgage News
Housing costs soar to three-year high
The cost of owning and running a home in Scotland has risen to its highest level since 2008 despite historically low interest rates, according to new research by the Bank of Scotland.
Although mortgage payments have fallen by more than a fifth since 2008, rises in the cost of ten out of the 11 housing expenditure categories such as utilities and maintenance have driven costs up.
Over the past year, the average annual cost associated with owning and running a home rose by 1.4% (£116) from £8,525 in March 2010 to £8,641 in March 2011.
In monetary terms, electricity, gas and maintenance charges were the biggest contributors to the overall rise in housing expenses.
Despite this increase, housing costs in March 2011 were still some 1.8% (£159) lower than the average total in March 2008 (£8,800).
The fall in housing expenses over the past three years was driven entirely by the substantial decline in mortgage payments, said the Bank of Scotland.
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The average mortgage rate paid by existing borrowers fell between March 2008 and March 2011 from 5.80% to 3.49%, helping to reduce the average annual mortgage payment (interest and capital repayments) by 21% (£796).
Mortgage payments were the only housing expense category to see a fall between March 2008 and March 2011 and also recorded the only decline over the past year (-3%).
The Bank of Scotland said that if mortgage costs were excluded from the calculation then housing related expenditure would have increased by 13% between March 2008 and March 2011, greater than the rise in inflation over the same period (10%).
In addition, those paying rent rather than a mortgage have seen their housing costs rise by 10% over the same period. Scotland recorded the third smallest decline in housing costs across the UK since 2008 (-1.8%).
Northern Ireland (-0.3%) and Wales (-0.8%) were the only regions to see smaller falls than Scotland. The cost of owning and running a home in London fell by 5.9% between March 2008 and March 2011; the largest of any region.
Suren Thiru, housing economist at Bank of Scotland, said: “Household finances remain under pressure with the significant drop in mortgage payments since 2008 mostly offset by increases in other household bills.
“Rising utility bills have been a clear driver behind this, along with increases in maintenance costs and council tax charges. The current strain on household finances is particularly concerning at a time when earnings growth remains weak.”