Despite the recession, homeowners are 25% better off this year than they were in 2008 due to record low interest rates slashing mortgage costs, research showed today.

The average homeowner with a mortgage now has £1075 a month left to spend after meeting all of their fixed monthly outgoings, such as housing costs, utility bills, transport costs and debt repayments, up from £859 in 2008.

The increase has been driven by an 8% fall in household costs during the past 12 months, as reductions to the Bank of England base rate cut monthly mortgage repayments for those on a variable deal, according to Ernst & Young.

The accountancy group said average mortgage repayments, based on a 25-year loan on a standard variable rate, had fallen by 20% during the past year to £553.58 a month, with homeowners on tracker deals seeing even greater reductions.

Electricity and gas prices have also fallen by 8% and 5% respectively from their 2008 peak, although total energy bills remain 53% higher than they were five years ago.

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.

However, with the price of petrol soaring almost 5p a litre in the last month alone, this cut could prove to be shortlived.

Despite the falls, other household bills have continued to rise during the past year, with public transport costs 6% higher and buildings insurance up 3%.

Jason Gordon, retail director at Ernst & 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."

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

Mr Gordon said this had led to many consumers using their increased disposable income to pay off debts or increase savings, rather than spending the money.

He added: "In recent weeks, there have been some tentative signs of stability in the economy and the housing market. Consumer confidence has also picked up from its all-time low.

"However, it remains to be seen whether these indicators translate into a sustainable recovery. Until they do, it's unlikely that consumers will rediscover their appetite for retail therapy."