Getting sensible about SSIAs

CityLiving: Will your SSIA go on a bathroom TV or on paying off the mortgage, asks Edel Morgan

In most of the SSIA surveys conducted in recent years, the numbers saying they're going to spend their money on home improvements has been consistently high - usually somewhere between 21 and 32 per cent . None that I've seen have provided breakdown in figures between those who intend to carry out basic renovations to boost the value of their property and those who are going to splurge on a luxury item for the home they might never otherwise have been in a position to buy.

With five ECB interest rate rises and with gas and electricity prices going up , you'd imagine a lot of people, who last year had notions of turning the spare room into something indulgent like a zen meditation space or a mini-spa, will now put the money to more practical use, such as supplementing extra mortgage payments or paying off debt.

Earlier this year AIB, in association with Amárach Consulting, found that most people's first priority was to invest the money .

So one wonders, then, who is going to be splashing out on frivolous items at the Digiweb Ideal Homes Exhibition starting today in the RDS which is being billed as "A Huge Home Improvement Opportunity for SSIA savers".

The organisers envisage people spending in their thousands on essentials like glass radiators (yes really) and murals for their children's bedrooms.

Based on yet another survey conducted at last year's show, they're expecting an attendance of over 40,000, and an expenditure of €60 million. The press release briefly mentions the usual types of home improvements, such as painting your house and revamping your kitchen but the emphasis is on blowing money on decadent pieces such as a garden sculpture, home cinemas and gyms, television for the bathroom, and period makeovers for the bedroom (in the style of the Spartans perhaps, given the current financial climate?).

It remains to be seen whether the organisers will get the mass splurge they've been expecting. The timing of the exhibition might be a bit previous, given that the bulk of SSIAs won't mature until after Christmas.

Economist Jim Power of Friends First, who is on record as saying he hoped people would use their SSIA to clear debt, believes that most people will take a conservative approach.

"Some will obviously spend, on holidays, cars, etc, and there will be a certain amount of conspicuous consumption, but in a rising interest rate environment I think a lot of people will be cautious."

He says the number of SSIAs cashed in so far represent "a tiny amount of the total with over two-thirds due to mature after January.

" So it's really too early to tell. There isn't a spending binge going on yet and there is anecdotal evidence that people are now looking at debt as an issue."

He's not surprised that so many people are intending to spend their money on home improvements. "The average SSIA payout is not a huge amount of money in terms of putting a deposit on a new house and, with interest rates going up, many are choosing to stay put and do up the house they are already living in." But he believes that most people will opt for more sensible basic refurbishments "and the luxury stuff will be the exception rather than the rule. The big test will be Christmas, when traditionally people decide to buy the flat-screen TV or whatever and the SSIAs might prompt more of that sort of thing, but the overriding feeling is that people will be careful."

Accountant John O'Connell of Hamill Spence O'Connell says he's intending to spend his windfall on his home and believes the wisdom of that is "down to everyone's circumstances. Five years ago it might have seemed like a lot of money but there's not much you can buy for the average SSIA amount now. You might get a new kitchen but it's not going to increase the value of the house dramatically."

As to whether it's prudent to blow the lot on an indulgent item, he says it really depends on your income. "For a lot of more well-off people, it's fun money. We won't really know how the money is being spent until next year. "

Aileen Eglington of AE Consulting, which is promoting the Digiweb Ideal Homes Exhibition, says she's going to buy a hot tub with her money. "It's not often you get a chunk of money like that so I'm going to treat myself and then go back to saving for something important."

She says the exhibition attracts the "middle market", many of whom have relatively small or no mortgages. "There are a lot of people aged 40 and upwards whose life won't be made difficult by interest rate rises. It's really young Dublin people who are the most affected."

The message, says Eglington, when approaching SSIA expenditure is be frivolous "but be sensible in your frivolity and buy something good. I'm sick and tired of going into houses with beech kitchens with stainless steel fridges, and wooden floors with the ubiquitous rug (this is my house she's describing). Everyone is doing the same thing and that's what the show is great for, it introduces people to new ideas. For example, you can commission a fabulous rug from a company. It might cost more because it's hand-made and a one-off design but the SSIA will allow you to do that."