Inflation is affecting everyone in 2022. The cost of living and even purchasing groceries seems to be at a crippling high. According to the U.S. Bureau of Labor Statistics, The Consumer Price Index for All Urban Consumers raised to 9.1%. This increase in the “all items” index is the most significant 12-month increase since November 1981.
As prices rise for consumers, inflation impacts every aspect of a person’s life, including how much a person spends on home improvement projects. The inflation has caused some homeowners to abandon home improvement projects altogether.
According to CNBC, 43% of homeowners have delayed home improvements and maintenance because of inflation. Here are some noticeable ways that rising rates affect home improvement loans.
Rising Rates and Material Costs
Higher prices for everything impact how much materials cost, from paints to plaster to sinks and drywall screws. The cost of lumber also jumped in 2020. Lumber costs, supply chain issues, and inflation are increasing prices. Even as these prices come down, contractors might not reduce their rates because they fear prices spiking again.
How Fuel Costs and Rising Rates are Connected
Historically, fuel costs also trump overall inflation, which impacts every motor vehicle operator. However, construction companies feel the impact of fuel costs heavily. Contractors need large vehicles that can haul heavy products.
Large trucks usually don’t get excellent gas mileage. When gas prices increase, construction services might also rise to offset the cost it takes for contractors to keep fuel in their trucks. Operating front-end loaders, dump trucks, and cranes might be more expensive.
What to Consider About Rising Rates and Home Improvement Loans
Many homeowners use loans to pay for home improvement projects. Since the Federal Reserve has raised interest loans to combat inflation, home improvement loans are becoming more expensive. Rising construction costs and higher rates mean homeowners feel pressured to overextend themselves to cover a home improvement project’s cost.
Thus, this increases the risk of a loan default (a borrower fails to repay the funds based on the initial agreement). Some homeowners even require contingency reserves or extra cash on hand.
Contractors must also deal with rising interest rates on business and equipment loans. These higher operating costs impact the homeowner.
The Demand for Contractors
As mortgage loans increase, current homeowners most likely won’t rush to buy a new home. They might find it more affordable to enhance the home they already live in, increasing the demand for remodelers. If inflation stays high, homeowners might even be on a long waiting list to have contractors come out to their homes.
A Word of Advice from Pure Finance
As the eligibility criterion tightens, you’ll want a lending program that can quickly adapt to these changes and continue competitive loan programs for even subprime homeowners. You want to offer customers the best financing to ensure they can have the home of their dreams even though life has become so expensive. If you’re looking for better rates for your home improvement loan, contact Pure Finance today.
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