Oh we are feeling the pain!
The Reserve Bank of Australia has today lifted the cash rate for a fourth consecutive month by half a percentage point to 1.85 per cent. We are expecting banks to again pass on the rate rise.
Further rate rises are also expected over the coming months as the RBA looks to bring inflation back within its target band of two to three per cent.
What does this means for those looking to build a new home or investment property?
– Your serviceability (how much a bank will loan you) will be reduced. For some this puts a stumble in the plans and sparks a need to revisit your initial build budget/ plans. Reach out to your bank/ broker to see how the rate changes impact you.
– Loan repayments will be higher than you may have planned. Snapshot: owners with a $500,000 mortgage will now pay roughly $140 a month extra, those with a $750,000 mortgage will see an increase of around $211. It’s great to ask your bank/ broker how much repayments are likely to be with the rate changes. Although you may have an approval in place being a variable rate, this will change. Ask the question and budget accordingly.
– The fear of the unknown around interest rates has seen a lot of people pause on plans and for some even cancel build plans altogether!
This is devastating for some but it has seen land opportunities open up for others.
Is now a good time to build or should we pause?
Every client, every build and every situation is different and they should be assessed that way.
For some, buying a block and building now is a great option – You can capitalise on buying a block at old pricing through a nomination. A block that even only a few months ago wouldn’t have been available at all.
For others, the change in the market could mean finances are now strained or timing is off so it may no longer be the best option or the best time.
Don’t get caught up in the hype of the media. Interest rates are rising and yes they’re likely to keep rising but what that means for you is completely different to what it means for someone else.
Explore your situation deeply – Revisit and reset.
Understand your motivation in the goals you’ve set, revisit why you wanted a new home in the first place. Is this still something you want? Are the original plans you made still important to you? Are there any changes you should make? Sometime’s we get so focussed on a goal that we just push towards it forgetting to regroup along the way – things change over time and so do we!
With changing outside factors it doesn’t mean you should put a halt to your plans but you should revisit your situation and be clear on what the changes mean to you.
Building a new home is such a rewarding experience but it is a long process. Being clear on your why, your goals, your options, your situation, the industry and the process will help you to make informed decisions.
Don’t react just revisit and reset, you’ll find your way.