As the Reserve Bank of Australia (RBA) implements an interest rate cut, a sigh of relief is felt across the nation by many homeowners grappling with mortgage repayments. However, there’s a segment of the Australian population for whom this rate cut brings little comfort. They are the often-overlooked group of Australians in the midst of constructing their new homes, and their financial burden is set to increase despite the RBA’s move.
Take, for example, the Melbourne couple Nicole Lawler and George Boakye, who are currently watching their mortgage grow even as the RBA slashes rates. They represent the thousands of Australians who are partway through the home-building process, a journey that paradoxically leads to a larger mortgage as construction advances, while others enjoy the benefits of reduced loan costs.
For Nicole and George, the rate cut slightly eases the sting of their upcoming progress payment, but the months ahead loom with financial challenges. They’re balancing the costs of rent and a mortgage for their future home in Weir Views, west of Melbourne. ‘We are both working full time, and it’s just killing us,’ Ms Lawler laments. The couple, once accustomed to dining out and weekend getaways, now find themselves working tirelessly just to stay afloat, sacrificing quality time together in the process.
The state government’s ambition to see 80,000 homes built annually over the next decade underscores the need for additional support for those brave enough to navigate the financial risks of home construction, especially those also shouldering rent.
Anthony Garubba, Burbank national sales and marketing general manager, acknowledges that the Melbourne family’s situation is far from unique. He suggests that it would take multiple rate cuts to alleviate their financial strain and that such cuts could also incentivise prospective homebuyers to contribute to easing the housing crisis.
Phil Dwyer, president of the Australian Builders Collective, echoes the sentiment that homebuilders today are too easily forgotten, even as they endure extreme financial hardship to help address the nation’s housing shortages. ‘I think we probably should be helping these people out,’ he asserts, pointing out that the rate cut alone is insufficient for those dealing with progress payments.
Matthew Kandelaars of the Property Council of Australia’s policy and advocacy group emphasises that with cost of living pressures, particularly housing affordability, it’s clear that helping more Australians into homes should be a top priority. He calls for a streamlined construction process and for governments at all levels to address the affordability challenges faced by those wishing to build.
Meanwhile, families who purchased homes at the market’s peak in 2021, reassured by then RBA governor Phillip Lowe that interest rates would remain low until 2024, are now facing the reality of the first cut since their purchase. Sarah Finlay and her partner, who bought a home in Wyoming near Gosford, NSW, managed to lock in a fixed rate before the unexpected rate hikes. Now, as their fixed term ends, they’re refinancing to secure a lower variable rate, hoping for modest monthly savings.
As the Finlays and many others navigate their mortgage commitments, the broader picture reveals a complex landscape where interest rate cuts are not a panacea for all. The rate cut is a step in the right direction, but for those in the midst of building their dream homes, the journey to financial relief is far from over.
Have you experienced similar financial hurdles while building your dream home? How has the recent rate cut affected your mortgage planning? Share your thoughts or experiences in the comments below—let’s keep the conversation going and support one another through these challenges!
Also read: Is the property market in a frenzy? Industry experts weigh in on rate changes
