Should you move or improve?
If you’re thinking of improving your home, it’s important to think about how you’ll cover costs
High house prices combined with rising mortgage rates mean that many people may be tempted to stay put and improve their homes rather than move.
The Bank of England’s Monetary Policy Committee raised the base rate to 1% on Thursday, the first time it has reached this level for 13 years.
Myron Jobson, senior personal finance analyst, interactive investor said: “The window for cheap mortgages is closing rapidly and the spectre of higher interest rates means that mortgage rates are likely to return to levels we haven’t seen in a while.”
As a result, homeowners may decide to stay and renovate their current properties rather than relocate, hopefully adding value, as well as making them a nicer place to live.
According to Rated People’s latest Home Improvement Trends report claims, the pandemic continues to influence the type of home improvements people are planning for 2022, with many homeowners wanting to create more space, and multi-functional rooms in which they can both work and relax.
Separate research from the Mortgage Advice Bureau found that many people are focusing on making their properties more energy efficient, especially giving rising gas and electricity prices. It found that one in four (23%) households intend on making improvements to their home to try and slash their household bills, with one in six planning to get new windows to help retain heat during the winter months.
Ben Thompson, deputy chief executive at the Mortgage Advice Bureau, said: “For those who can afford to do so, it can be a double win of improving your home and making it more environmentally friendly, but also cutting costs.”
Home improvements that boost the value of your home the most
A self-contained annex is the top improvement that homebuyers value the most, according to Rated People’s report, typically adding £17,003 onto the average property price.
Large functional improvements also add value, with a new roof increasing the value of a property by an average £15,407, and new windows throughout adding £12,784 of value.
Newly renovated kitchens and bathrooms can also add a significant amount of value to your property, boosting a home’s value by an average £13,877 and £11,906 respectively.
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The exact amount of value home improvements can add will depend on where you live in the country. For example, a 25 square meter extension on a West London property, which might cost around £30,000-£40,000 to build, could add on as much as £260,687 to its value, compared to a still sizeable £98,955 if the property was located outside the capital in Brighton.
Funding home improvements
Although certain home improvements can significantly boost your property’s value, they often come at a steep cost, especially as the cost of many building materials is rising sharply.
Checkatrade’s Job Price Index shows that central heating, carpentry and plumbing have been worst affected by the price increases during the past quarter.
Mike Fairman, chief executive officer at at Checkatrade, said: “It’s not surprising to see carpentry and plumbing have seen sustained price increases, as the cost of raw materials such as timber and copper continues to skyrocket. In fact, prices are so volatile that, many of our tradespeople are currently only keeping quotes valid for a few weeks at a time or even only quoting for labour with cost-plus materials on top”.
If you’re thinking of improving your home, it’s important to think about how you’ll cover costs, and to look at ways to keep your budget down. Checkatrade advises getting at least three quotes to make sure you’re not overpaying, and ordering materials early given that prices are continuing to rise. Reusing materials such as timber or pipes which may otherwise have gone into a skip can also help reduce costs.
If you’re only making relatively minor changes to your property, such as redecorating, and don’t have savings readily available, you may decide to use a credit card to cover costs. Make sure you pick one with a lengthy 0% introductory period so that you can pay off what you owe before you start being charged any interest.
Loans are another way to fund home improvements. Rates are often most competitive if you’re looking to borrow between £7,500 and £15,000 but are likely to be higher if you’re borrowing more or less than this. If you’re considering a home improvement loan, think carefully about how long you’ll need to repay what you owe, as the longer the loan term, the more interest you’ll pay back overall.
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