9% of borrowers opting for renovations instead of moving
One in 10 homeowners plan to invest their finances into making home renovations instead of moving, according to Together’s new report, ‘Opportunities in Challenging Times’.
Together’s research finds the main drivers behind this decision includes needing a home that is more energy efficient and cheaper to run (17%), as well as a direct response to homeowners having spent more time at home during the festive period, getting tired with faults and areas needing renovating in their current homes (16%).
And uptake of second charge mortgages has also been on the rise within the last decade – Together’s internal data shows second charge funding post 2016 increased to 56%, up from 29% pre-2016, with 90% of all second charge funding valued at £190,000 or greater.
A third (33%) of homeowners who plan to carry out home improvements this year are planning to fit new carpeting or flooring, whereas 30% will install a new kitchen, and 28% will upgrade their bathroom this year. A further 16% plan on improving their homes energy efficiency by installing solar panels, insulation, heat pumps and draught proofing.
James Briggs, head of personal finance intermediary sales at Together, said: “While the cost-of-living and fears around rising interest rates may threaten and cause some homeowners will property ambitions to pause plans, there is clearly still a healthy appetite for new purchases this year.
“And, while some may not move into new homes, we are seeing a trend for homeowners planning to spend on home improvements on their current properties.
“That being said, the reliance on people’s savings and additional loans may cause undue stress when keeping up with existing bills and repayment costs; all of which could hamper plans later down the line.”
He added: “There is a real risk of homeowners overlooking the value of second charge mortgages which can offer a simple route to unlocking further equity to fund these renovation projects without them having to resort to unsecured borrowing via a personal loan.
“Second-charge loans are not widely available through mainstream lenders, and many may not have ever heard of them, so it may be worth potential borrowers speaking to an adviser who has access to specialist mortgage products like these.”
According to Together’s research, homeowners who plan to make home improvements to their home expect to spend £12,200 on average on renovations.
The majority (63%) are planning to use their savings to cover renovation costs, while 8% plan to take out a personal or “unsecured” loan and 5% will remortgage.
Together’s research revealed that while three fifths of homeowners (57%) are aware of second-charge loans as a viable option to fund these renovations, 40% are overlooking this option, potentially leaving them open to additional financial stress later on.
A second charge mortgage – also known as a secured loan – is a loan that allows you to use any equity you have in your home as security. It effectively sits on top of your existing mortgage.
In total second charge lending in 2022 totalled £1.71bn, a 45% increase from a year ago, according to the latest industry data from Loans Warehouse.
Loans Warehouse draws its data from a range of specialist lenders including Together.