Ninth consecutive interest rate rise driving creative property solutions

February 8, 2023

Mortgage holders were bracing themselves this week as the Reserve Bank of Australia (RBA) raised interest rates by 0.25% on 7 February 2023. It was the ninth consecutive interest rate rise given by the Bank leaving many looking at the property market, wondering what to do next.

Granny Flat Wollongong -1

In Australia, the Reserve Bank of Australia (RBA) sets the official cash rate, which is used as a benchmark for interest rates on various loans and savings products. When the RBA increases the cash rate, it makes borrowing more expensive and can lead to higher mortgage repayments for borrowers and higher returns for savers.

These interest rate rises are generally regarded as a response to inflationary pressures, as the cost of living rises, with electricity, fuel, many grocery essentials – and rents rising for Australians as a result of global issues like post covid - supply chain disruption and the war in Ukraine.

The impact of an interest rate rise can be different for individuals, businesses and the overall economy, with some potentially benefiting while others may be negatively affected. No matter the situation, with rates continuing to rise – and more expected, individuals and families are considering their options.

Aussie families looking for options

Elizabeth Brown, 34, from Long Jetty has a good amount of equity in her home – about 50% after a good few years of paying it off. She has two young children and is about to head back to work in  retail after maternity leave. Her husband, a plumber, is the main income earner but with household costs rising and mortgage costs up an additional $350 a month – there’s nothing extra for them to save for ‘the next thing’ in their lives.

Elizabeth says “with the rental market the way it is, we know we could get between $650-700 per week for our home. We have started looking at Granny Flats and asking about using the equity in our home to build it. We figure, a Granny Flat can be up in 6 months – if we move into that and rent out the front we might just be back on the front foot by the time we come out of what looks like a tough few years ahead”.

One benefit for those in a position to consider it like Elizabeth, is the ease with which Banks will lend for smaller loans and against existing equity. Where large loans would be under scrutiny with rising interest rates, smaller loans that are building another income generating asset could be looked on favourably by the banks. The rate of loans as dropped considerably since rates started rising – and to entice borrowers some banks are even offering cash back and other deals to take advantage of.

Happy family outdoors. Beautiful smiling mom with children two kids - girl and boy. Shot with shallow depth of field.
Cubitts

Managing Director of Cubitt’s Granny Flats and Home Extensions, Kate Cubitt says “we’re seeing clients come to us, asking for costs and feasibility studies, with the idea that having a granny flat on the property can be a way to offset the impact of rising interest rates”.

But it’s not just homeowners looking to become landlords or increase the value of their investment coming through Cubitt’s doors – Kate says, “Gen Z is looking at house prices, looking at mortgages, and parents in a position to do so are suggesting they come home. Building a Granny Flat in mum’s backyard is a flexible addition to family lifestyle that gets young adults off the rental rate race now – but also provides options for owner later in life – renting one of the homes out for income, or even retiring”

With CoreLogic data in 2019 suggesting that the addition of a Granny Flat could add as much at 30% to home value, there’s more than one way a Granny Flat is helping to offset the impact of rising interest rates.

Families who are worried that interest rate rises will continue to rise, and stay there for some time will be looking at the resource they have available to maintain their lifestyle. Kate finishes on a key point – “A Granny Flat is about having options. Doing the cost and feasibility is about having options. No one is rushing into decisions until they have done research, but families are coming to us to imagine the possibilities, and help them lay out a plan

 

Cubitt’s offer a completely free feasibility study and quote based on detailed onsite assessments. They operate across the East coast of NSW from Taree to Moruya, west into the highlands and Blue Mountains and cover all of the ACT. Visit a showroom or call 1300 721 150.

Free On-Site Assessment at Your Property

Interested in finding out how to make a positive investment from a Cubitt's Granny Flat or Home Extension? Get in touch for a no-obligation site inspection today.

If you are looking to purchase a new property and want to do a Granny Flat Suitability Check - please use this form instead.

We require your name, email and phone number to get back to you - and the more you can tell us about your build project, the more effectively our local teams can help.

VIEW MORE OF OUR

Recent Blogs

ACT Land Zone RZ1 – You Can Now Build a Dual Occupancy up to 120m and Subdivide Your Block

ACT Canberra residential zone 1 (RZ1) blocks measuring 800 square meters or more are now eligible for the construction of two homes. Here is a quick FAQ on some elements of this change to help you start planning your ACT Dual Occupancy

Read More about ACT Land Zone RZ1 – You Can Now Build a Dual Occupancy up to 120m and Subdivide Your Block

End of Year Sale! $10k Cashback Offer When You Sign in 2023

To set up our schedule for 2024 we are offering an amazing $10k off your tender price while it’s still valid.

Read More about End of Year Sale! $10k Cashback Offer When You Sign in 2023

Top 50 NSW Suburbs With Granny Flat Potential

There could be a million residential properties across the nation with the potential to accommodate a Granny Flat. Is your suburb on the top 50 list?

Read More about Top 50 NSW Suburbs With Granny Flat Potential

Stickybeak – Three Bedroom Granny Flat “The Hamilton”

Take a stickybeak at this Coastal built three bedroom Granny Flat. The highlight of the home is its well-appointed kitchen with a prominent island bench, perfect for entertaining. The central open-plan living area fosters a warm and communal atmosphere, allowing for easy interaction and shared moments with loved ones.

Read More about Stickybeak – Three Bedroom Granny Flat “The Hamilton”

Beating the Rate Race: Investors with Granny Flats Have Better Return

Discover the emerging trend of homeowners utilising granny flats for rental income in Australia’s competitive real estate market. Learn how this strategy can help cover mortgage costs while addressing housing challenges.

Read More about Beating the Rate Race: Investors with Granny Flats Have Better Return

Designing Dreams: Meet Jasmin, Design Manager at Cubitt’s

In the world of design, creativity knows no boundaries, and every career has a unique trajectory. Meet Jasmin, a talented designer on Cubitt’s Design Team, whose journey commenced in 2014. Her initial projects involved collaborating with builders to craft high-end custom residences, emphasising the importance of aligning designs with clients’ needs and tastes. Jasmin now helps clients at Cubitt’s turn the home they live in, into their forever home.

Read More about Designing Dreams: Meet Jasmin, Design Manager at Cubitt’s

About Kate Cubitt

Kate is Managing Director of Cubitt's. She is an experienced company director, avid investor and keen to share the financial insight she's gained being a female leader in the building industry.