Extend or move? The big financial decision for homeowners

Extend or move? The big financial decision for homeowners

What are the reasons Brits opt for one over the other, and what barriers prevent us from making a decision?

If you need a little more space in your life – maybe you’re starting a family or there are more children on the way – you’ve got a big decision ahead to make: do you extend, or do you move? There’s a lot to weigh up - the relative costs of extending and moving and the impact on home insurance premiums, to name but two. Our report explores the extend-or-move conundrum to help you decide which is better for you and your family.

Which do Brits believe is better?

Nearly twice as many Brits believe extending their property is the better financial decision than moving to a new house,1 with less than a quarter saying moving is a good financial choice in the current property market.

Surprisingly, a third of Brits don’t know which choice would be better for their finances, meaning many could be making the wrong decision without knowing all the facts.

There is also a clear generational divide, with older people believing that, overall, extending is the better choice, while younger people think it is better to move to a new house. This probably reflects the fact that the older generation are more likely to own their property while younger people may be trying to get on the property ladder.

What Brits think is the better financial decision

What extensions do Brits think add the most value?

If we take a look at what types of extensions Brits believe add the most value to a property, there isn’t a huge variance – on average we believe any type of extension will add 20% to the value of the house. However, this is much higher in London, where residents believe the average extension will add 35% to the value of their house.

Some 21% (37% in London) of Brits believe a loft conversion will add the most value.

What extensions do Brits think adds the most value

Funding an extension or move

Whether you believe it’s better to extend your house or move to pastures new, there’s still the question of how to raise the funds.

Across the UK, nearly half of Brits would fund an extension or move using existing savings, with only 7% willing to borrow from family members.

On top of this, 44% of Brits would use a mortgage to fund an extension or move.

How Brits would fund an extension or move

However, there are clear variances in the data across age ranges, with two-fifths of those aged 18 to 24 claiming they would fund an extension or a move by borrowing from family members, bringing the Bank of Mum and Dad into play. This number tends to decrease as people age, with only 1% of those over the age of 55 saying they would borrow from family for this purpose.

On top of this, a significantly larger percentage of those aged 18 to 24 would fund an extension or move with a personal loan, with 42% saying they would consider this. Compared with the next highest percentage – 26% of those aged 35 to 44 – and we can see that younger people are far more willing to opt for loans.

In a big contrast to the rest of the country, half of Londoners would consider using one or more credit cards to fund an extension or move. While most of the rest of the country would rather rely on existing savings or mortgages, Londoners seem to be willing to take the risk on credit cards for these large investments.

Impact on home insurance

One of the most interesting patterns to emerge from our study relates to the British public’s attitude towards home insurance when considering an extension to their house.

Despite extending a property having both an immediate and long-term impact on insurance premiums, nearly half of Brits would not inform their home insurance provider if they were carrying out an extension to their home.

The belief that home insurance providers don’t need to be informed of extensions seems to be most firmly entrenched in the older generations - 66% of those aged 55 or over claim that they would not let insurance providers know.

But despite large numbers of Brits not informing insurance providers, only around 20% of the British public believe an extension would have no impact on their insurance premium, meaning that although the majority accept that it would, they still wouldn’t notify their insurer.

Interestingly, while only 31% of the country correctly believe their insurance premiums will increase while the work is being completed, this figure is much higher in London, where over half believe this will be the case.

Some 42% of Brits believe premiums will increase after the work is completed.

What the experts say

Kevin Pratt, consumer affairs spokesperson at MoneySuperMarket, says it is easy to overlook the implications of having work done at your property on your home insurance: “When you undertake a substantial project, it can be a stressful time, with lots of things to think about. Not surprisingly, insurance can be forgotten, or householders simply think it’s a case of telling their insurer next time they take out cover.

“What’s crucial is that you tell your insurer before the work starts so that you can check you’re not invalidating your existing policy by having the work done, while at the same time adding any extra covers that the project requires. And once the work is complete, you’ll need to check again that everything is in order.

“There might be an upwards adjustment to the premium, but this is worth paying to make sure you’ve got all the protection you need.”

Graham Richardson, from the Household Team at Admiral, commented further: “Carrying out a renovation could affect your property’s rebuild cost, number of bedrooms or bathrooms, and these are factors that may influence your insurance premium.

“Some insurers might not offer cover for renovations, so it’s important to tell your insurer about building work so that the property remains adequately covered in the event of a claim. This information also helps insurers offer renewal based on the correct property details, giving you peace of mind that your policy is up-to-date and correct.

The barriers to moving

There are many barriers stopping Brits from moving home or extending their property.

But with 36% believing that moving house costs too much, it’s noteworthy that only a fifth of Brits would consider extending their house rather than moving because they can’t afford to buy a bigger house in the same area.

Added to this the fact that 28% of homeowners think that extending would add more financial value to their property, it seems that many Brits believe extending is the better option.

Barriers to moving

Who is moving and extending?

So, how many Brits have overcome these hurdles and actually moved or extended in the past decade?

How many Brits have extended or moved in the past decade

With 21% of the country considering moving to a new house, and 13% pondering the pros and cons of extending, that means nearly 5 million homeowners2 have moving or extending on the mind.

Those in a relationship are much more likely to move than extend, with 34% considering packing up for pastures new, and with fewer than 10% considering extending instead.

Younger people seem to be moving more often, with over a quarter of those aged 18 to 24 moving in the last year, and 22% of those aged 25 to 34 in the last two years. The older generations are staying put in larger numbers – as well as nearly 70% of over 55s not having moved in the last decade, 6% have never moved house at all!

East Anglians seem to be the most settled by some margin, with three in five not having moved in the last decade. The Welsh are also sticking with their properties, with nearly half having stayed put over the last 10 years.

But that doesn’t mean the Welsh are opting to extend instead, as they are the most extend-averse in the country with less than a quarter having ever extended their house.

In fact, the majority of Brits have never extended their property – 57% have never added to their property, despite the potential for extra space and value. However, Londoners seem more inclined to extend, with near 70% of London home-owners having extended their house at some point.

Making a house, a home

So, it seems that Brits are divided when it comes to extending or moving home, but if you want to find out what your best choices are and how these will affect your home insurance, check out our handy guide.

Sources

 

1 Consumer research carried out on behalf of MoneySuperMarket, between 14th February 2018 and 16th February 2018 with a sample comprised of 1,021 UK homeowners

2 34% of the 14.3 million owner occupied houses in the UK, according to National Statistic’s English Housing Survey 2015 to 2016

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