The next time the Reserve Bank of Australia will meet is the 1st of April and the experts are in two minds as to whether this meeting will result in another interest rate cut or whether the official cash rate will remain at 4.10%. The cash rate had stood steady at 4.35 for more than a year, not being adjusted since November 2023, however we saw a rate cut on the 18th of February, 2025. In this article we review why new home buyers and those looking to build should be monitoring the cash rate as they proceed towards making a decision.
Firstly, we take a look at the job of the RBA. In a very basic nutshell, the RBA’s job is to keep inflation between 2 and 3 per cent over the medium term. When inflation rates change, the RBA must make decisions as to how to manage it, often increasing rates as inflation increases in an effort to slow down economic activity and spending. The balance here is to decrease activity without causing a recession or causing unemployment rates to rise. The last time the cash rate was this high was back in 2011, when it reached 4.5%, yet experts predict that throughout 2025 we can expect the cash rate to potentially reach 3.1% by the end of the year. This being said, predictions can be wrong, there is no guarantee so borrowers should approach their loans with careful consideration and caution.
Now we take a look at how lower interest rates can impact those borrowing to build a new home. The first impact is a benefit for borrowers and buyers with an interest rate cut, it means lower mortgage repayments, potentially giving you extra room in your budget. Mortgages for new construction are directly impacted by interest rates, so it is wise to consider interest rate rises and their impact if you are borrowing on a variable arrangement. That said, another benefit associated with a drop in interest rates is your borrowing power could improve. Lenders assess applications based on the repayments and the borrower’s capability to make those repayments, even with some interest rate rises factored in. This gives you the opportunity to borrow more, if rates remain at a lower rate, offering more budget for your new home. Lower interest rates can also mean more competition in the market when it comes to materials, potentially bringing down the overall price of your build. All these factors look good for those considering a build in 2025 and beyond, however you should always approach lending an investment decisions with caution and only ever work within your means.
At Tapscott Homes, we are not a ‘cheap’ new home builder, nor do we focus on a huge volume of builds. Instead, we focus on those wanting a home that is built to stand the test of time, and with custom finishes that you cannot get at a project builder. Interest rate cuts and lowered inflation is great for our customers, because it does mean they can relax budget restrictions a little and really get those unique and ‘wish-list’ inclusions that might otherwise get cut from the list as the budget becomes strained.
If you are looking for a new home builder that can work with your budget to create a dream home you can love for years to come, we are the team for you. We understand with interest rate cuts, there will be more buyer and building activity and therefore urge you to start planning, budgeting and most importantly talking to us soon if a custom or modified new home are on the horizon for you. We build from Maryborough south to Northern Rivers and Tweed, and have a range of single and double storey standard plans that can be modified or chat to us about our custom design offering that could see you in a unique, high-quality home while the rates are low.
Please note: this information has been provided as general advice only and has been prepared without taking into account your objectives or your individual financial situation or needs. Readers should obtain independent financial advice before making any decisions regarding their own financial situation.
