Home improvement costs adding to debt fears?

A number of people may be adding to their debt fears by borrowing money to finance home improvements, new research has suggested.

According to a study carried out by Sainsbury’s Finance, one-in-five (20 per cent) of all personal loans were taken out to pay for work done on properties in the first half of 2010.

The report showed individuals in Britain are continuing to invest heavily in their houses despite challenging economic conditions.

It was revealed the figures showed almost no decline from those registered in 2009 (20.7 per cent).

However, there was a 47 per cent increase in the number of people using the cash they borrowed to fund DIY projects alone between 2007 and 2009.

In the first six months of 2010, such work on dwellings accounted for 19.5 per cent of the total value of personal loans in the UK, but the average value of these loans escalated by 12 per cent between 2009 and the first half of this year – rising from £8,237 to £9,225.

More than £3.2 billion was taken out in loans to pay for home improvements across 2009, the organisation estimated.

It added the value is set to be similar in 2010 if current trends continue.

A significant increase in these types of loans was recorded between 2008 and 2009, elevating from 15.8 per cent of all loans to 20.7 per cent.

According to a recent survey carried out by Cocompare.com, 41 per cent of British consumers are concerned their financial position is in a worse state than it was 12 months ago.

By Amy White