The cost of owning and running a house rose by 7% in the financial year 2004/05, more than three times the rate of CPI inflation, according to new research by Halifax based on the latest Office for National Statistics data.

The 7% increase was the second successive annual increase above the rate of inflation. Over the past three years, the total costs of housing have increased by 14%, far outpacing the 4.6% rise in inflation over the period.

Council tax and fuel bills to outstrip mortgage payments in 2005/06

For the first time since Halifax has issued this survey, council tax and utility bills combined are estimated to represent the single biggest component of total costs in 2005/06. They should therefore account for a higher proportion of the overall costs than mortgage payments.

Costs of owning in London are 28% above the national average

The costs of owning and running a home vary widely across the country. At £8,133 per year, London housing costs are the highest. Costs in the capital are 63% above the annual housing costs in the North East, the cheapest region at £4,990 per year. The capital's costs are 28% above the national average.

There is, however, significantly less variation once differences in incomes are taken into account. The East of England has the highest housing costs relative to household income, at 18.6% of gross disposable income, whilst costs remain lowest in the North East at 16.0% of gross disposable income.

Higher mortgage rates boost costs in 2004/05

Total annual housing costs increased by £418 from £5,948 in 2003/04 to £6,366 in 2004/05. Higher mortgage interest payments contributed the most to the increase in the cost of owning and running a house in 2004/05 - rising by 20% to an average of £2,146. (The average mortgage rate in 2004/05 was 5.4% compared with 4.4% in 2003/04.)

Halifax estimates that higher fuel and council tax bills will more than offset lower mortgage costs in the current financial year, pushing up the costs of running a home in 2005/06. Additionally, both council tax and utility bills are expected to rise by well above inflation in 2006. For example, the UK's biggest energy supplier, British Gas, increased gas and electricity tariffs by 22% on 1 March 2006.

Council tax bills in England are set to increase by 4.5% in April, more than double the rate of inflation, according to a survey conducted by CIPFA. Council tax and utility bills are set to represent 35-36% of total housing costs in 2006/07.