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Buying and running property costs at highest level since 2008 in Scotland

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. Despite this increase, housing costs in March 2011 were still some 1.8% (£159) lower than the average annual total in March 2008 (£8,800).

The increase in Scottish housing costs over the past year was driven by rises in the cost of 10 out of the 11 housing expenditure categories. In monetary terms, electricity and gas charges were up £102) and maintenance costs up £33) were the biggest contributors to the overall rise in housing expenses.

The fall in housing expenses over the past three years was driven entirely by the substantial decline in mortgage payments, the report also shows. The average mortgage rate paid by existing borrowers fell by 231 basis points 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, down 3%.

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 which was 10%. In addition, those paying rent rather than a mortgage have seen their housing costs rise by 10% over the same period.

The research shows that utility bills have risen by 19%, £259, since 2008, the biggest increase of any housing expenditure category. Housing maintenance and repair expenditure saw the next largest increase at 17%.

Scotland recorded the third smallest decline in housing costs across the UK since 2008, down 1.8%, followed by Northern Ireland, down 0.3%, and Wales, down 0.8%.

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.

‘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,’ said Suren Thiru, housing economist at the Bank of Scotland.