Utility and council tax bills have overtaken mortgage payments as the largest cost burden for homeowners for the first time.
Inflation-busting rises in gas and electricity bills and increases in council tax mean the share of total housing spending has risen to 34 per cent, Halifax bank said yesterday. The figures, for the year to March this year, mean these costs are now greater than mortgage interest payments, which take up 33 per cent.
The average cost of council tax and utility bills was £2,244, up 9.4 per cent on the previous year, while an average interest-only mortgage was virtually unchanged at £2,146. It is a marked reversal from four years ago when mortgage payments took up 33 per cent of the total compared with 31 per cent for the tax and utility bills.
The gap is likely to widen further in the financial year that starts next month as homeowners are hit by massive rises in gas and electricity prices announced by the power giants. British Gas increased gas and electricity prices by 22 per cent on 1 March, while council tax bills will rise 4.5 per cent next month- more than double the rate of inflation.
Halifax forecasts power and tax bills could take up 36 per cent in the 2006-07 financial year, while mortgage interest costs will fall if interest rates are cut, as Halifax expects. The cost of owning and running a home rose 7 per cent in the year to March 2005, more than three times the rate of inflation.
Last year Mervyn King, the Governor of the Bank of England, angered the Treasury by blaming a rising tax burden and soaring utility bills for the marked slowdown in consumer spending. A Treasury spokesman said: "Reforms to personal tax and benefits that the Government has introduced since 1997 have benefited all families." He said the average household would, by next month, be better off by £950 a year in real terms than in 1997.Reuse content