Homeowners sitting pretty in 2009

The effects of record-low interest rates on mortgage costs mean homeowners in 2009 are 25% better off than they were last year, research has shown.

According to professional services firm Ernst and Young, the average mortgage holder has £1,075 disposable income a month after meeting outgoings such as housing costs, utility bills, transport costs and debt repayments. This is up from the £859 figure of 2008.

Moves by the Bank of England to dramatically cut its base rate have seen a slashing of monthly mortgage repayments for people on variable deals, leading to an overall fall of 8% in household costs over the past year.

Looking at a 25-year loan on a standard variable rate, the group said average mortgage repayments had fallen by 20% during the past 12 months to stand at £553.58 a month, with homeowners who are on tracker mortgages seeing even greater reductions.

And despite total energy bills remaining 53% higher than they were in 2004, electricity and gas prices have fallen by 8% and 5% respectively from their 2008 peak.

Households have also seen a 5% reduction in the amount they pay for petrol, with the typical family now spending £164 a month on it.

But despite these falls, other household bills have continued to rise during the past year, with council tax increasing by around 3%, while public transport costs are 6% higher and buildings insurance is up 3%.

Jason Gordon, retail director at Ernst and Young, said: "Even though we're still in recession, many UK householders who have not been hit by unemployment have experienced a dramatic upturn in their monthly budgets over the last year.

"However, the figures clearly do not tell the full story. Although a typical consumer with a mortgage may now have more money to spend on a monthly basis, the sharp house price declines of the last 12 months have significantly eroded their overall wealth.

"In addition, alongside falling house prices, the bleak economic climate and fears of job losses have had a devastating impact on consumer confidence."