UK homeowners are at risk of high interest charges as they seek to fund home improvement projects over the next year, according to research from Pepper Money.
The study found that around 817,400 mortgaged households plan to take on debt, with 26% intending to finance home improvements.
More than half of mortgaged homeowners (53%) chose credit cards as their main method of financing, while 67% had never heard of second charge mortgages.
Ryan McGrath, director of second charge mortgages at Pepper Money, said: “Home improvements can be a significant and valuable investment, both financially and emotionally.
“Not only can opting to improve rather than move add value to your home when you come to sell, but it can also make the experience of living there more enjoyable altogether.”
McGrath added: “However, it’s vital that people don’t sign up to unnecessary costs when they’re tackling home improvement projects.
“Our research shows credit cards continue to be the default option for thousands of homeowners looking to borrow over the next year, but this isn’t always the most cost-effective option when you consider interest rates, repayment terms, and length of a loan.
“Homeowner loans are a little-known but often sensible way to fund such projects, and can offer more competitive rates and lower monthly repayments than unsecured borrowing.
“While a second charge mortgage isn’t right for every circumstance, I would urge anyone contemplating home renovations to look into whether a secured loan could be for them and talk to a broker.”
