Homeowners borrowing more for home improvements, boosted by cheap mortgages

Moving house is an expensive business and an increasing number of homeowners are deciding to borrow more and improve their current homes instead, according to The Times this week.

Dubbed the “staying-put generation”, these homeowners mostly aged between 38 and 55, would like to buy bigger homes to accommodate their growing families.

But the fees associated with moving are high: from stamp duty, to conveyancing, to getting surveys done. So they are taking advantage of cheap mortgage rates and borrowing cash to improve and extend their homes instead.

40% rise in five years

The Times reports that the number of households increasing their mortgage to free up cash has risen sharply in five years. Hamptons International has analysed statistics from UK Finance, the trade association, and 221,800 homeowners took this route last year compared to just 146,900 who did so in 2013. This is an increase of more than 40% in just five years.

In fact, the level of remortgaging to release equity hasn’t been higher since 2008 when 516,400 households did so, according to the report.

While some are using the money for things like paying off debts, one in five are using the cash to fund home improvements like extensions.

Remortgaging is also a popular route for those aged over 50. Many have been put off downsizing because of the costs.

Get fee-free expert mortgage advice today from our partners at London and Country. You can start your search online or speak to them today

Borrowing could get even cheaper

While there are some very cheap rates available for homeowners wanting to release equity, there is speculation rates could drop further.

A base-rate reduction, down from 0.75%, could mean even cheaper deals.

This in turn could lead to even more homeowners deciding to stay put and extend rather than moving.

Thinking of remortgaging? Speak to a fee-free expert mortgage adviser today to find the best deal for you

Staying put is here to stay

David Hollingworth of L&C mortgages told The Times that it’s likely that the trend for people to stay put and improve will continue, due to the costs associated with buying and selling.

“Those considering a move to a new property will very quickly start to contemplate the cost of doing so,” he says. “That could include estate agency fees to sell, legal and survey costs, and stamp duty land tax amounting to a £15,000 charge on a £500,000 purchase price. These are numbers that will sharpen the focus of potential movers quickly.”

However, he warns that taking equity from your property isn’t without risk. “Taking an extra loan should be seen as a serious commitment,” he adds. “If house prices were to fall it would leave borrowers with less equity or, in more extreme cases, no equity.”

If I do want to extend my home, what do I need to consider?

While there are strong arguments for extending and improving homes rather than moving it’s important you consider it carefully before committing.

Even if the main motive is to gain more space, it’s still worth finding out if your plans will add value. Speak to a good local estate agent who can give a view on whether your plan would add value to your home.

They should also be able to give you an indication of how much it would increase the value by, which may help inform your budgeting for the project. Our guide to home renovation costs can also help with budgeting.

Find out more in our guide Home Extensions: Where do I start?

Today’s best mortgage deals

Click below to see more best buys. Speak to London and Country for fee-fee expert mortgage advice on 0800 073 2326.

Subscribe

Notify of

new follow-up comments new replies to my comments

Label

Name*

Email (will not be published)*

Δ

Please send me the HOA newsletter!

Label

Name*

Email (will not be published)*

Δ

Please send me the HOA newsletter!

1 Comment

Newest

Oldest Most Voted

Inline Feedbacks

View all comments

Load More Comments

Angela Kerr Director, Editor

Related Articles

Step by step guide to buying a house

How to sell your house: The step-by-step guide

How long does it take to buy and sell a home?

• Sign up to our FREE weekly newsletter

  for the latest news, advice and exclusive money saving offers

  Read our privacy policy

Latest News

Half of parents wish they could help children buy a home and 1 in 4 feel guilty they can’t

 April 15, 2024

New Homes Quality Code Review

 March 28, 2024

Only 40% of UK adults know what conveyancing is

 March 14, 2024

Almost 2 million aspiring homeowners don’t think they’ll follow in the footsteps of their parents – the generation gap worsens

 February 26, 2024

View all news articles