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More Australians Borrowing For Home Renovations

According to new data, Australians have increasingly been borrowing money for home improvements in the first half of this year.

Australians borrowing more money for home renovations

ME Bank has revealed it saw a “substantial increase” in renovation home loan applications between January and June 2017.

For cosmetic loans, such as kitchen and bathroom renovations, there was a 48% increase in the first six months of this year and an average borrowing request of $40,000.

Structural-related loans for things like new builds saw an increase of 25% during the same time period, with the average borrowing amount requested at around $400,000.

ME Head of Home Loans Patrick Nolan says the trend towards renovation funding could be related to the cost of housing.

“While many homeowners are still relocating, it is clear many are choosing to stay put to avoid the high house prices, and expenses such as stamp duty,” he said.

Mr Nolan says most ME customers are using the equity in their home to fund renovations:

  • Sydney-siders generally have an average of $443,900 of equity in their homes
  • Melbournites typically have an average of $276,845 in equity
  • Canberra property owners have an average of $203,813 in equity

“Expanding your home or putting on a new addition is a great way to use equity in your home as it typically adds value to the property,” he said.

“In addition, quality home improvements can add to your lifestyle and save on the cost and hassle of relocating to a new home.”

Reno loans popular with P2P borrowers

Peer-to-peer lender (P2P) RateSetter says funding for home improvements is the second most popular borrowing option for its customers, superseded only by vehicle financing.

According to RateSetter, lending volumes through its channel are doubling every six months, which is largely driven by home improvement (renovation) loans.

Home improvements currently make up 19% of total broker loans on RateSetter, with the average loan value of $14,996.

It was also recently revealed that 18% of RateSetter personal loan customers were taking out home improvement loans for the purposes of ‘green renovations’ aimed at reducing energy bills.

Loan purpose Percentage of total broker loans Average loan value
Car and vehicle finance 20% $13,186
Home improvement 19% $14,996
Debt consolidation 12% $21,136
Business 9% $28,094
Education 7% $13,921

Source: RateSetter

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