Average family £7 a week better off

23 June 2009 06:30am

The average family is £7 a week better off during May following a fall in mortgage repayments and other living costs, research has shown.

A typical household had £164 a week left for discretionary spending after meeting all of their essential costs, nearly 5% more than they had in May last year, according to Asda.

The supermarket giant said the increase was the biggest year-on-year jump in disposable income since April 2008.

Essential spending, such as housing and transport costs, was £3 a week lower in May than it had been a year earlier.

The fall was largely driven by a drop in mortgage repayments, with these 45% lower than in May 2008 following reductions to the Bank of England base rate to a record low of 0.5%.

Lower transport and electricity costs also left households with more money to spare.

The situation represents a turnaround from a year ago when soaring commodity and fuel prices pushed inflation to a 30-year high.

Charles Davis, an economist at Cebr, which produces the research for Asda, said: "In May the ASDA income tracker showed the largest year-on-year rise since April 2008 as the effect of the Bank of England's quantitative easing and falling inflation came through.

"Spending power has increased relative to a year earlier in both April and May. However, this is not necessarily translating into increased spending on the high street - as shown by the 0.6% month-on-month fall in retail sales in May.

"This is due to increased levels of precautionary saving as consumer debt levels remain high, unemployment rises and households see an uncertain economic climate ahead."

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