High Mortgage Rates Trap Homeowners: Renovations Increasingly Out of Reach

The burden of mortgage interest rates that have soared to a three-year high—breaching 7.5%—is not just holding back new home purchases. The impact is now spilling into the pockets of existing homeowners: they are stuck in older properties, while renovation costs become increasingly suffocating. The latest data from home services platform Angi shows many homeowners are staying put about five years longer than they originally planned. Instead of moving, they face a difficult choice: renovate with expensive borrowed funds or let their homes age without meaningful repairs.

Until now, home equity loans or home equity lines of credit (HELOCs) have been the go-to instruments for financing home improvements. But as benchmark interest rates surged, those instruments became expensive too. Although originations of second mortgages and HELOCs rose nearly 20% in the second quarter of this year compared with the previous quarter, experts suspect the funds are not flowing into renovations. Instead, many are using them to pay down credit card debt or simply to get by. “When interest rates keep rising, tapping home equity becomes more expensive. This will hold back consumer spending, and especially hit big-ticket items like home renovations,” said Tom Graff, Chief Investment Officer at Facet, a financial planning and wealth management firm.

The decline in renovation spending is clearly visible on big-box retail shelves. Data from Datavations, a retail analytics firm that tracks sales at Home Depot and Lowe's, recorded a 10% to 28% drop for major renovation categories from September 2025 to August 2026. Products such as shower stalls, kits, and enclosures were hit hardest: sales fell 21%, with unit volume down 28%. Bathtubs also weakened 10%, while cheaper pull-down kitchen faucets (averaging US$147) fell only about 3%. “There is a clear gradient in our data: the more expensive the item, the deeper the decline. Homeowners are not cutting back on maintenance, but major renovation projects are increasingly being postponed,” said Philip Odelfelt, CEO of Datavations.

“I need to renovate my kitchen, but when I look at the prices and interest rates, I can't afford it. I'll just wait. That's the entire housing market right now.” — Mark Ratchford, professor of consumer behavior at Tulane University.

This phenomenon is not just an American story. In Indonesia, mortgage rates also remain at high levels even though Bank Indonesia has begun easing policy. Many homeowners are holding off on moving or renovating because borrowing costs have not fallen significantly. As a result, the secondary property market—including older homes in need of repair—has also gone sluggish. Developers face the challenge of selling new units, while consumers prefer to save or pay down installments. If this trend continues, the domestic construction sector and building materials retail could feel the impact, though not as severely as in the US, where the mortgage market is dominated by long-term fixed rates.

More worrying, postponing renovations is not just about aesthetics. Delayed repairs to roofs, windows, or heating and cooling systems can make homes more vulnerable to extreme weather. “Every year the weather gets more extreme. If essential renovations are postponed because people can't access home equity, homes become more vulnerable to damage that could actually be avoided,” said Andre Kazimierski, President of HomeHero Roofing. On the other hand, the market for “fixer-upper” homes has also gone dormant. Ratchford added, “Five to ten years ago people bought properties, renovated them, and sold them for a profit. That rarely happens now because borrowing and repair costs are too high.”

Macro effects are also starting to show. Graff reckons that slowing consumer spending is already weighing on GDP growth, and the only major support right now is data center spending. “If data center spending slows even a little, the economy could easily fall into recession,” he warned. Meanwhile, Genine Fallon of Praxis Rock Advisors highlighted that home equity locked up for the long term will reduce property turnover, renovation spending, and transactions overall. The question is whether near-term rate cuts will be enough to reopen the renovation spending tap, or whether the opposite will happen—more homeowners choosing to stay in old homes without repairs, waiting for a momentum that never comes?