The government has announced plans to make it easier and cheaper to carry out home extensions for the next three years. They plan to wave any requirement to seek planning permission when extending eight metres from detached properties or six metres from semi-detached or terraced homes. These new figures are double the current limits, incentivising people to carry out work now. Savings will be made by not having to apply for planning and paying for professional fees that can cost thousands of pounds. David Cameron hopes that the relaxation of planning will give new impetus to economic growth and encourage building.
These new regulations will encourage people to reconsider their position, with some people who were thinking of selling their property perhaps rethinking their strategy. The changes may just tip some people to stay and improve rather than moving on. The knock on effect of this may mean more work for builders initially as extensions are being constructed, but less work for example on new build houses or improvements to houses they would have moved onto. Also, as mentioned the professionals from planning departments, architects and solicitors will not benefit from the governments planning strategy, with estate agents getting less instructions to sell. Although the initial announcement looked like a vote winner, perhaps the extra economic activity may not be as much as was originally hoped for.
In addition, the homeowner needs to ask themselves a few questions before embarking on an extension. For example; with the average cost of a garage being £14,000 and a conservatory £22,000, how are they going to finance the project? Also, once the project is finished how long do they intend staying at the property and how much will the extra work increase the value of the house? If you don’t intend staying in the property for long after the extension has been completed, it is possible that it could affect the equity and make it more difficult to move on in the future, as it is not guaranteed the improvement will increase the value of the property. If you decide to go ahead with the improvement and accept the equity risk it is not too much of a problem to proceed if you have the cash sat in the bank. However, if you need to borrow, it could be more difficult to obtain finance than say five years ago. The reason for this is that lenders have less money to lend now and lending criteria has been tightened, particularly with incomes and house prices stagnating or falling over the last five years.
Many borrowers who find out that they do qualify for a further advance in many cases will be disappointed to discover that they do not qualify for the same terms on the further advance as on the original loan. Reduced equity in your property can increase the rate you pay for your further advance. For example; some lenders like Cheltenham and Gloucester are charging as much as 6.19% over the base rate taking the payment to 6.69%, whilst average mortgage rates are hovering around 4%. So it could be worthwhile to see if you can cut overall borrowing cost by remortgaging. Many lenders are offering free valuations and legal work, coupled with competitive rates that could lead the way forward for many home improvers. As always it is worth taking independent mortgage advice to ensure you get the best deal for yourselves.
Kieron Bassett Financial Services have two Independent Financial Advisers who specialise in mortgages. Contact us on (01524) 832057, via e-mail, info@kieronbassett.com, or visit www.kieronbassett.com.
Kieron Bassett DipPFS
17th September 2012
“