Nearly two thirds (63%) of homeowners have used a credit card to make a significant purchase, however, when asked about future intentions, only 36% said they would use their card again for this reason, according to new research from Pepper Money.
This may suggest that when considering future purchases and when they are able to plan ahead, homeowners are more aware of the long-term costs associated with unsecured borrowing through credit cards and are more willing to explore alternative options.
A third (33%) of homeowners have used a mortgage to finance a significant purchase and 14% have turned to second charge loans when seeking to borrow larger amounts to fund life events such as home renovations or to consolidate debt.
Looking at how people will fund significant purchases in the future, a quarter (25%) of homeowners said they would consider a personal loan, 18% would use a mortgage and 17% would opt for a secured loan to fund a major purchase.
This shift towards more long-term, secured borrowing suggests that in a more unpredictable economic environment, homeowners are looking to minimise their outgoings while gaining certainty and predictability from their monthly repayments.
Meanwhile, homeowners are increasingly open to leveraging the value of their property to access larger sums of money, demonstrating a growing shift in how people view their assets and the opportunity that the value built up in their home can offer when looking to finance significant projects or purchases.
Ryan McGrath, director of second charge mortgages at Pepper Money, commented: “The data offers a clear view of homeowners who are thinking about big-ticket spending both now and in the future. While credit cards and savings are still the most commonly used options, there’s a noticeable shift happening. The fact that 63% have used a credit card for a major purchase, but only 36% say they’d do so again, suggests people are starting to rethink the cost and consequences of short-term, unsecured, borrowing.
“At the same time, we’re seeing a steady rise in longer-term forms of credit such as personal loans, mortgages and secured loans. These options, as well as the ability to access them quickly, offer a more predictable and efficient way to borrow.
“Secured loans, in particular, often get overlooked, but they can play a valuable role for those with equity built up in their home and who need access to larger sums to fund home improvements or to consolidate debt under a single regularly payment. While not right for every homeowner, all options should be considered with a broker to ensure that consumers understand all of their options and can chose the ones that best fits their long-term financial needs.”
