Homeowners across the UK are now borrowing more money from mortgage lenders than ever before to fund home improvements, according to new figures released this week.
According to mortgage broker Mojo Mortgages, the average amount of money being applied for by existing homeowners to fund renovation projects has increased by just over £13,000 (up 25%) over the course of the pandemic – rising from an average of £52,209 in 2019 to £65,267 as of August 2021.
It’s not just the amount of money being borrowed per applicant that’s risen – the amount of people looking to borrow has also seen a significant uplift – with remortgage applications for home improvements up 174% for the year so far (when compared to this time in 2019).
Experts believe there are several factors behind the rise in total applications and the amount of funds being applied for with record low mortgage rates alongside the rising costs of building materials and labour, as well as more ambitious projects creating the perfect storm for remortgage applications.
Cassie Stephenson, director of mortgages at Mojo Mortgages, said: “After such an uncertain 18 months you might have thought that purse strings would have tightened from both homeowners and lenders, however in many cases this has been the complete opposite.
“With people spending more time in their homes than ever before, homeowners have had the time to imagine their dream property and the steps required to make this a reality as society opens up and returns to normality.
“Couple this with record low rates for remortgages – as low as 0.83% in some cases – and you can see why homeowners are looking to strike while costs are low. Of course, it’s important to consider all the fees involved and not to focus solely on rates when looking to get the best deal.”
Adrienne Minster, CEO of Rated People, adds: “This boom has been fantastic for ambitious tradespeople wanting to take on more work and grow their businesses, but it’s also been one of the factors contributing to a materials shortage. Materials such as cement and timber are costing tradespeople more to buy and, as a result, quotes can be higher than normal for work.
“Trade businesses are working hard to secure supplies, but consumers can continue to benefit from planning improvements ahead of time and being flexible with dates where possible.”
Explaining further, Cass Heaphy, digital director at Paving Direct, said: “With the effects of COVID-19 still working through the global supply chain, manufacturers and suppliers are either raising their prices or taking significant hits on their margins. This is now being felt by consumers as the cost of cement, timber and other building materials soar.”
“The underlying cause is the rapid scaling up many businesses are undertaking from their lockdown states. There is a huge demand for goods and supplies everywhere with less sealift capacity than there was prior to Covid. This is coupled with additional Covid disruption in national ports, haulage networks and manufacturing. These factors create conditions where shipping and transport prices have skyrocketed, and this is being passed on in the cost of goods and the on to the consumer.”
Advice on how to secure the best deal on your remortgage for home improvement application
How do you use a remortgage to fund home improvement works?
You take the amount left on your current mortgage and add the cost of your home improvement project, then apply for a remortgage for the total amount. For example:
£150,000 outstanding mortgage + £40,000 cost for extension = remortgage for £190,000
13 steps on how to use a remortgage to fund home improvements
- Estimate your total costs of the work required – make sure to obtain quotes from multiple sources to ensure you get the best deal
- Work out the remortgage fees required – remember to include any costs for architects, planning permission, building regulation certificates and of course VAT (20%)
- Explore what remortgage rates you could get with additional borrowing – a mortgage broker will be able to do this for you
- Get a before and after valuation on your property to check what difference any work will make
- Obtain official quotes for the work and add up all additional costs
- Decide if you want to go ahead with the work
- Decide if you want to fund it via a remortgage
- Apply for your remortgage – speak to your mortgage broker and confirm all the details and figures
- Choose a lender and submit your application with all the relevant documentation – some lenders depending on the amount you want to require will ask to see builders’ quotes
- Wait for the valuation and underwriting process to be complete
- Get your approval and receive your funds
- Complete your work and enjoy your new home
- Don’t forget to obtain all the certificates you need for when you come to sell your property in the future
For a full guide on how remortgaging for home improvements works and how to secure the best deal, visit: https://mojomortgages.com/remortgage/remortgaging-for-home-improvements-how-it-works