Improve don’t move!

Home improvement is becoming more popular than moving as thousands more decide to improve, not move

    • Around £15.4billion was shaved off mortgage debt from April to June
    • This suggests homeowners are paying off their mortgages and making home improvements rather than releasing equity
    • High house prices and stamp duty has made moving too costly for many

 

Home Imrovement | 50 plus informationRecord numbers are choosing home improvement rather than moving because of cheap mortgages and rising house prices. People are choosing to improve their homes with loft and kitchen extensions rather than moving to bigger properties, figures reveal.

The Bank of England says £15.4billion has shaved off mortgage debt from April to June – the largest amount in any three-month period since records began in 1970.

This suggests that rather than releasing equity from their houses, homeowners are opting to put money in by paying off mortgages early or adding value to a property with a range of home improvements such as attic conversions, new kitchens, and bedroom extensions.

It represents a dramatic reversal from before the credit crunch, when it was more common for people to use their homes like cash machines, remortgaging to get ready money for anything from a holiday to a new car.

So, what’s going on?

From 2001 to the beginning of 2008, the Bank’s housing equity figures show that mortgage debt was always growing. This means people were consistently taking more money out of their houses than they put in.

But the recession appears to have triggered a change in people’s attitudes towards the amount of debt they want to have, Bank figures suggest.
Homeowners are now investing in their properties – making improvements and opting for extensions such as attic conversions and by adding conservatories.

Clare Francis, a mortgage expert from comparison site Moneysupermarket, said homeowners are ‘channelling spare cash into their mortgage’. She added: ‘Regular over- payments will help reduce the amount you owe, reduce the amount of interest you will pay over the term, and lead to you being mortgage free sooner.’

Henry Pryor, an independent housing expert, warned this has had dire consequences for Britain’s struggling retailers. When people were withdrawing money from their homes before the recession, much of it was spent on the high street. Now, people are choosing to save rather than spend. But he added: ‘Homeowners are being responsible. They are hunkering down and doing what they were told to do – act responsibly and pay down your debts.’

Houses are being built at the fastest pace since November 2003, a report shows.

Work started on 45,000 new homes in the third quarter of 2013 thanks to soaring demand, researcher Markit said.

Some 110,000 new homes have been started so far this year, as many as the whole of 2009 – but still, far fewer than the 250,000 a year experts say are needed to solve the housing shortage. The figures will be welcomed by the Chancellor, amid claims schemes to boost lending, such as Help to Buy, are inflating a dangerous housing bubble. Bank of England governor Mark Carney last night pledged to watch the market and clamp down on reckless lending to prevent ‘boom and bust’.

For a lot of households, there comes a time when your home becomes a bit of a squeeze. Maybe growing children are filling the house with their friends, toys, and noise and making the rooms seem smaller than they used to be. Or perhaps a burgeoning business means a home office would be a preferable to the kitchen table if only to keep butter off the paperwork.

So should you move somewhere bigger, or extend your house to make it large enough for you and your activities?

In some situations, the decision is, of course, made for you. If you live in a flat with no garden, there is little chance of making it bigger. But if you have a house with outside space or a loft with enough headroom, extending your property becomes a real possibility.

Whether it makes more sense to move or to extend depends on a number of different factors – the costs involved, your future plans, how emotionally attached you are to your house, the area you live in and the type of house you have.

Extending

Your location and the level of demand for your type of home could make a big difference to the financial implications of extending versus moving. “In high-value areas like London it can be worthwhile digging under the house to add a basement, but in other parts of the country it won’t be worth it,” says Helen Brunskill of Brunskill Design Architects.

Keith Gorny, director at central London estate agents Marsh & Parsons, says of property in the capital: “The reality is that if you are able to extend, it is often sensible to do so from a financial point of view.” The cost of buying a new house, he says, would far outweigh the cost of building.

However, the final result needs to be a balanced, rational home. A four-bedroom family house with no garden or parking, or a house with large living space downstairs and tiny bedrooms upstairs, could be problematic if you need to sell in the future. Even if you plan to live there for a long time, you will want to avoid spending a lot of money on expensive building work that makes it harder to sell.

The cost of an extension depends on where you live, what kind of structure you decide to build, how complicated unavoidable matters such as drainage are and, of course, how big it is going to be.

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