Rising Interest Rates and Renovation Trend

A recent survey of 1,000 Australian homeowners has shown that rising interest rates might be the main reason more homeowners are choosing to renovate their homes this spring instead of selling them. In this explanation, we’ll explore why more homeowners are opting for renovations, how they’re paying for them, and offer some tips if you’re thinking about renovating or selling your property this spring.

Why Homeowners Choose to Renovate

The survey conducted by Aussie Home Loans found several key reasons behind the renovation trend:

1. Affordability: About 54% of property owners are renovating because they can’t afford to sell and buy a new home.
2. Need for a Better Home: 26% of respondents want a larger or more modern home but can’t afford to purchase one.
3. Increasing Home Value: 22% are renovating to increase the value of their current home.
4. Interest Rates: A significant 73% of participants said they’re renovating because of rising interest rates.
5. Future Plans: Interestingly, 64% of homeowners intend to stay in their renovated property, while 28% plan to sell, and 9% plan to rent it out.

Impact of Rising Interest Rates

Sebastian Watkins, Chief Operating Officer at Aussie, emphasized that rising interest rates are pushing more households to stay in their current homes for longer. Despite the traditional selling season in spring, economic changes and budget constraints are altering homeowners’ plans. Aussies are recognizing the value in their existing assets amid these challenges.

How Homeowners Finance Renovations

When it comes to funding renovations:

1. Refinancing: 25% of respondents said they would finance home improvements by refinancing their home loans and using their existing equity.
2. Loan to Value Ratio (LVR): Of these refinancers, 17% would increase their LVR to 80-85%, and 13.5% would push it above 90%.
3. Savings: For those not refinancing, 29% plan to fund renovations by using savings from their home loan offset accounts.

The research shows that many households are willing to accept higher LVRs or pay Lenders Mortgage Insurance to achieve their renovation goals. Additionally, savings in the offset account can reduce the impact of higher interest rates on monthly mortgage payments.

Challenges Due to Rising Costs

Higher interest rates have impacted homeowners’ ability to invest in home improvements. Around 42% of respondents have delayed major property works in the past year due to rising costs. This pent-up demand is likely to impact costs in later years.

Getting Support for Your Property Plans

Sebastian Watkins recommends seeking support from experts if you’re planning to renovate or sell your property. Professionals are well-equipped to assist homeowners looking to increase their property’s value.

In summary, rising interest rates are influencing homeowners to choose renovation over selling, driven by factors like affordability and the desire for better homes. Homeowners are financing renovations through refinancing and savings, even as they face challenges due to rising costs. Experts Like Cameron Construction can offer valuable support in navigating these property plans.