The size of home improvement loans has increased dramatically as homeowners add space to existing properties rather than enter the housing market. The number of people taking out home improvement loans has risen by 16% in the last year, and the average amount borrowed is up by 30% from £15,500 to £20,000, according to lender Abbey National.
Guy Aldwinckle, head of mortgage marketing at Abbey National, felt one of the drivers for home improvement, was the value it could add to a property. He said the average difference in price between a two-bedroom flat and a three-bedroom property was £27,4502. With the costs of stamp duty and legal expenses also to be taken into account, he felt it was cheaper for many to do work on their existing home rather than look to move.
He explained: ‘The number and size of the home improvement loans taken out suggests that in many cases, expanding your existing home can represent a more affordable option than trading up to a bigger property. Adding a conservatory, loft conversion or extension is also the best way of increasing the value of your home, compared with cosmetic improvements, which are unlikely to ever recoup the investment made.’
Of Abbey National borrowers taking out a home improvement loan, the main reason was for an extension or conservatory (26%), followed by a new kitchen (20%), and improvements to the garden (18%).