Are you spending your savings?
More of us are improving than moving. But where do you find the cash for an upgrade?
Homeowners are improving rather than moving. But many households are raiding savings to fund home improvements. And that could rip away their rainy-day funds comfort blanket.
Insurance is not always the solution. It only pays out if there is a sudden incident such as a lightning strike – it will not give a penny if the problem is due to old brickwork letting in damp or a worn-out roof.
According to AA Financial Services, the insurance arm of the road rescue organisation, the average UK household spent £2,634 on home improvements from July to September. But that figure hides everything from £26 for a coat of paint to £26,000 and more for new kitchens, bathrooms and bedrooms. It adds up, the AA calculates, to £71 billion – with just under half funded from rainy day accounts. Despite an interest rate rise, returns on savings are still almost invisible and below the rate that prices are rising, so many households reckon it’s better to spend than save and will worry about that rainy day when it happens.
Scotland has the highest number of savings raiders – with 55 per cent of projects north of the border financed this way.
But there are other ways of funding home upgrades without raiding savings or opting for credit cards.
Borrowing from parents – the
Bank of Mum and Dad, although some ask sisters and brothers – has overtaken formal loans with nearly one in five financing major work with cash from the family.
Usually, no interest is involved – and sometimes, those lending the money can be vague about repayment schedules.
One popular job at this time of year is winter-proofing the home. Low cost tasks include door and window draught-proofing – often just a roll of sticky-backed foam.
But there are still many homes where loft insulation is non-existent or inadequate. The average household spent just over £2,000 on this. Some laid out on improvements to plumbing – these typically involved £1,300 with Londoners most likely to upgrade water systems, probably due to the capital having the oldest housing amongst big UK cities.