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Borrowing for home improvements on the rise

The average home improvement loan has increased by 16% in 2019, with households in the South East borrowing more for home improvements than any other region in the first quarter of this year, whilst the East Midlands saw biggest spike in home improvement loans.

According to new data from Shawbrook Bank, the South East is the UK’s ‘DIY capital’, with households borrowing more for home improvements than anywhere else in the country during the first three months of 2019 and across the whole of 2018.

As much as 17% of Shawbrook Bank’s lending for home improvements went to borrowers in the South East in the three months to March, although this is down on the share for the whole of 2018 (21%). This is despite official figures reporting that house prices in the region increased by just 0.1% in the past year, with only London and the east of England experiencing lower growth.

Meanwhile, the East Midlands has seen the biggest spike in the first three months of the year compared to 2018, with the share of Shawbrook’s total lending for home improvement loans reaching 12% in Q1 2019.

Notably, the East Midlands has also seen the largest increase in house prices of any English region over the past 12 months.

The most recent official figures from the Office of National Statistics show house prices in the region increased by 4.4% in the 12 months to January 2019.

Shawbrook Bank managing director Paul Went said households “are clearly looking to maximise the value of their home by carrying out home improvements”, regardless of whether house prices in their region are flat or increasing.

Analysis of Shawbrook’s loan data shows the average size of a home improvement loan has increased by 16% when comparing the first quarter of 2019 with the same period for 2018.

The increase in the amount of money Shawbrook’s Personal Loan customers are borrowing to renovate their homes could be due to changes in the value of the pound. Since the EU referendum in 2016 the value of sterling has fallen and therefore the cost of imported goods and raw materials has risen.

Although the cost of home improvements may be on the rise if construction firms are forced to pass on price increases to their clients, there is still value to be made from renovations that are well-planned.

Figure 1: Share of all home improvement lending by Shawbrook Bank

Top 10 UK regions Q1 2019 2018 (12 months)
South East 17% 21%
London 15% 15%
North West 13% 12%
East Midlands 12% 7%
Scotland 10% 9%
Yorkshire & Humber 9% 9%
West Midlands 7% 8%
North East 7% 4%
East Anglia 5% 4%
South West 4% 7%
Wales 1% 4%

By Fiona Garcia

Source: DIY Week

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Record number of landlords remortgaging for home improvements

The number of landlords remortgaging to release money for home improvements has reached a record high, Countrywide’s Monthly Lettings Index found.

In the last 12 months, out of the 171,421 landlords who remortgaged their buy-to-let property, 9,523 did so to take money out to spend on their investment.

This is up from 8,459 in 2017 and three times more than in 2016 (2,967).  In the last 12 months 5.6% of landlords who remortgaged released cash to spend on their property, up from 1.9% in 2016.

The greatest increase was in the East of England where, in the last 12 months, one in 10 landlords (10.4%) who remortgaged released money to spend on home improvements, up 6.8% in the last two years.

Johnny Morris, research director at Countrywide, said: “A record number of landlords are remortgaging to release money to spend on their properties instead of trading up.

“The additional transaction costs incurred from the stamp duty changes for second-homeowners means more landlords are choosing to invest in their properties, refurbishing and improving them and holding on to them for longer to maximise gains.

“Average rents grew in seven out of eight regions across Great Britain, with Scotland being the only region to see falls.  Rental growth during the first quarter of this year stands at 2.1%, 0.5% faster than the same period in 2017, as low stock levels continue to drive growth.”

Every region across the UK has seen a rise, but regions in the South have seen the biggest growth in landlords releasing cash.  In London, 7.4% of landlords remortgaging released money for home improvements, up 4.4% in the last two years.

Landlords in London took out the most money to spend on buy-to-let improvements, £35,470 on average.

This is over three times the amount an average landlord in Yorkshire and the Humber withdrew (£11,150).  Across Great Britain as a whole, the average landlord remortgaging to make improvements took out £22,850.

The Midlands saw the fastest rental growth, up 2.8% year-on-year, followed by Wales (2.1%) and Greater London (2.1%). Average rents in Scotland fell for the second month in a row, but the rate of decline slowed in March.

Source: Mortgage Introducer