Households in Birmingham have enjoyed an average increase of more than £1,500 in their disposable income over the last five years – despite the credit crunch and double-dip recession.

Research by Birmingham accountancy firm UHY Hacker Young looked at the growth in household disposable income – the money left to spend or save after taxes and mortgages or rents – in the UK’s Top 40 largest towns and cities in the five years since the financial crisis.

Average Gross Disposable Household Income (GDHI) in Birmingham jumped by 14.4 per cent over the last five years from £10,987 to £12,566.

The increase in disposable income for Birmingham households is in line with the national average, but bigger than their Midlands rival, Nottingham.

UHY Hacker Young says that a significant driver of the increase in disposable income for many households had been the reduction in interest rates made at the start of the financial crisis.

Malcolm Winston, Partner at UHY Hacker Young, says: “The cut in interest rates meant that households in Birmingham experienced a sudden drop in their mortgage payments leaving them with a lot of spare cash.

"However, stagnating wages and high unemployment means that people just haven’t felt that increase in surplus cash.”

UHY warns that the growth in disposable income is now slowing as the impact of this sudden cut in interest rates fades.

With the first increase in interest rates in over six years a growing threat, increased mortgage costs will mean that future growth in disposable wealth in Birmingham could take a hit.

For this to be prevented, there would need to be a continued strong recovery in the economy to drive household wealth. “Increases to interest rates could hit Birmingham households hard. If families are feeling the pinch now, they will struggle if mortgage costs go up.”