Applications for cosmetic renovation loans have grown by 48 per cent in six months, non-major lender ME Bank has revealed, saying that the surge reflects the housing affordability “dilemma”.
Further, the bank has seen a 25 per cent increase in applications for structural renovation loans. The changes were measured over the six months from January to June 2017.
ME head of home loans Patrick Nolan said that increased applications for renovation loans could be tied to the high cost of housing.
He explained: “While many home owners are still relocating, it is clear many are choosing to stay put to avoid the high house prices and expenses such as stamp duty.”
The average amount borrowers requested for structural renovation loans (such as new builds) was $400,000 while borrowers looking to make cosmetic renovations (such as kitchen or bathroom renovations) asked for $40,000.
Most borrowers used the equity in their home to fund the renovations. ME Bank found that property owners in Sydney have the most equity in their homes, averaging $443,900 per property, while Melbourne owners have $276,845 of equity and those in Canberra have $203,813.
Mr Nolan said that withdrawing equity from a home is a “simple option” but is also limited to the value of the extra repayments made. He suggested that having a loan with an offset account can be an “easier” way to tap into a property’s equity.