Since 2007, the average UK house price has increased by 28%, while rents across the nation have also jumped by 15%. According to the ONS, the average weekly expenditure of the UK household has also reached its highest in the last decade having increased 24% since 2007.
But while our outgoings may be on the up research, we found that the proportion of household expenditure spent on homeownership is the lowest it has been over the last ten years! In addition, the percentage of weekly outgoings spent on rent is also the lowest it has been since 2011.
Using data from the ONS Emoov looked at all of the components of household expenditure since 2007, across all outgoings associated with owning or renting a property and what percentage of total average weekly household expenditure they accounted for.
The research found that the percentage allocated to paying weekly mortgage interest payments is the lowest they have been since 2007 with rent also seeing a decline to a six-year low.
As a percentage of the total household expenditure, the amount of our household outgoings spent on mortgage interest payments has dropped to just 3.77%, a notable difference to the 7%+ peak in 2007/2008. Similarly, rent now accounts for just 8.52% of our outgoings, the lowest it’s been since 2011 when it accounted for 8.44% of weekly household expenditure.
The cost of running our homes has also reduced with water supply at its lowest a proportion of total household expenditure since 2008 (1.61%). The price of electric, gas and other fuels in relation to other outgoings has also hit a nine-year low and although it is currently much higher than most other outgoings at 4.01%, it has reduced to the same level as 2008.
Finally, the cost of stamp duty is at its lowest level in the last 10 years at just 0.04% of the weekly household expenditure having peaked in 2003 at 0.14%.
So, what is it that is squeezing the affordability of owning or renting a home?
The cost of maintaining a home is now at its highest (1.55%) in six years, having peaked at 1.59% in 2011 before gradually breaking the 1.5% threshold again in 2017.
The total cost of household goods and services is at a ten year high, now accounting for 7.09% of total household expenditure.
The amount we’re spending from our total weekly household budget on council tax is at its highest level since 2011 as well, now accounting for 4.04% of household expenditure.
Despite the woes of the Brexit outcome and a failed snap election, house prices and rent have continued to creep up, remaining the largest financial hurdle for many where renting or homeownership is concerned.
That said, while they still account for the largest proportion of our household expenditure, the cost has actually reduced when compared to the bigger picture of our total household outgoings.
Unfortunately, while the proportion of spend in terms of getting a roof over our head may be reducing, the cost of maintaining that roof is highest it has been in a long time.
For those looking to get onto or further climb the ladder, it also shows the importance of managing costs when trying to save and demonstrates how reducing other weekly outgoings can make all the difference in improving your purchase power.Russell Quirk