Becoming a homeowner is a rite of passage that fewer adults are experiencing due to the rising cost of living.
New statistics published by Halifax reveal that the annual cost of owning and managing a home increased by £179 during the past year.
Though home ownership expenses were on the decline during 2008 and 2010 due to mortgage rate reductions.
They have been climbing for three consecutive years, putting homeowners in difficult positions and preventing other people from entering the property ladder.
Shocking Statistics Regarding Home Ownership
It currently costs 1.9 percent more to own and manage a home than it did in 2012 and two percent more than it did five years ago. Annual expenses averaging £9,590 have some homeowners teetering on the edge of debt. An 18 percent increase in overall consumer prices that has occurred since 2008 has caused many people to think twice about buying a home.
Between clothing, food, and utilities, they have enough expenses. Replacing rent with a more expensive mortgage, homeowner insurance, and other household costs would be too much to bear.
During the past year, housing costs increased in all regions of the UK. London and east Midlands experienced the lowest increase of two percent. However, London is still the most expensive area to call home, with home ownership expenses totaling £12,094, which exceeds the national average by 26 percent.
Low mortgage rates are less attractive when home costs do not decline proportionately. High housing costs make it more difficult to qualify for a mortgage and the effect is compounded by increasing general living costs and no movement in income.
Household Costs That Have Increased the Most
Households are saddled with many expenses but the costs for energy and water have risen the most during the past year. Electricity and gas bills have increased by 4.2 percent, which equates to an annual average of £70. Homeowners are paying an average of 5.6 percent more for water this year than they did in 2012, forcing them to find an extra £27 in their household budgets.
Many homeowners struggled with these expenses last year and are finding themselves in even worse condition this year.
The only silver lining in this cloud is the fact that over the past five years, the average annual payment for a mortgage has dropped by 21 percent. This £950 decline has freed up some money to cover the rising costs of energy.
Unfortunately, some homeowners were in debt long before this decline occurred so any extra money must be used to repay their balances rather than allocated toward necessities such as heating and food.
Handling a Money Shortage
Homeowners are dealing with their personal financial crises in different ways. Some are taking second jobs or changing employers in order to earn more money. Others are tapping into savings and liquidating private retirement plans.
This can be a risky move because having no excess money means that any unexpected expenses may be unaffordable. Rather than getting out of debt, these people may be sinking themselves further into it.
Informal and formal debt management techniques are alternatives that some people are exploring. For those who can afford to repay their debts if given more time, a debt consolidation loan may be the answer.
This brings together all expenses into a single monthly payment that is more affordable because it is made over an extended period. While this does not wipe out debt, it can help a homeowner get control of it.
There is no single best way to handle a financial shortage. Each situation is unique and so is the best solution. To identify the ideal course of action, homeowners should explore all the options and talk to a debt management professional who provides free advice.
Once they have committed to a solution, sticking to it will yield the best results. Managing household expenses before bills slip into arrears can prevent negative consequences from arising.
Living Costs Represent An Increasing Amount of Monthly Expenditures
Halifax issued another piece of depressing news for anyone trying to make ends meet. Citing Consumer Price Index (CPI) data, the building society revealed that basic living costs currently account for more than fifty percent of monthly expenditures. The CPI indicates a substantial ten-year increase in the proportion of basic goods to the typical basket of goods.
The Office of National Statistics reports that expenses for shelter, water, heat, and food represent nearly one-quarter of total monthly expenses. Add personal care, healthcare, and transport to this and basic outgoings represent 51.9 percent of all expenditures. This figure has risen 8.1 percent since 2003, leaving people with less money to spend in other areas such as recreation, leisure, and culture.
Transport costs currently represent 14.8 percent of total expenses, representing the largest monthly expense. Some people are reprioritizing expenses and cutting back on things like dining out or even getting rid of their cars. They want to eliminate the cost of car ownership, which represents more than ten percent of monthly expenditures.
Rising costs for the most basic goods and services have made it more difficult for people to afford food and shelter. After paying for these essentials, they are left with less money to spend on other things. As a result, expenditures for recreation, cultural entertainment, and leisure have declined by 13.5 percent since 2003.
It has become necessary for many people to take a hard look at how much they are spending to run a household. The higher these costs, the less money people have left over for savings or debt repayment. Many people must use severe cost-cutting measures to prevent slipping deeper into debt and putting their homes at risk of foreclosure.
Until the economic situation improves, life will be difficult for many UK residents. Some homeowners will struggle to keep themselves afloat and many people who were planning to enter the property ladder will wait until they are on more solid financial ground. By living within their means, these two groups can keep themselves out of additional debt.