Hodge Bank’s analysis of its borrower data showed that for the year to date, 18 per cent of homeowners had taken out a RIO mortgage for the purpose of a home improvement compared to 27 per cent last year. Additionally, just seven per cent of borrowers used the product to consolidate debts, compared to 13 per cent last year.
Emma Graham (pictured), business development director at Hodge, said: “This is a big drop for debt consolidation in particular, especially given the cost of living crisis and inflation continuing to rise. You would have expected more people to be using products such as the RIO to make their debt more manageable and have it all in one place – but according to our data, it seems that the opposite is true.
“The fall in the use for home improvements is understandable though, as many homeowners are no doubt tightening their belts and leaving any DIY or house extensions for a few years until the cost of building materials and labour drops.”
Leap in RIO loan book
Other uses of a RIO mortgage stayed consistent however, with 27 per cent raising no extra money compared to 30 per cent last year and 30 per cent using RIO to purchase another property, in contrast with 27 per cent in 2021. Some 12 per cent of borrowers used a RIO to gift family members, similar to the 11 per cent who did the same in 2021.
From January to August 2022, the lender reported a 41 per cent annual jump in the value of its RIO loan book.
Graham added: “It is encouraging to see that the RIO product is still proving useful to so many people to fund other improvements in their lives, such as a new home or helping out loved ones, at this economically difficult time.”
