Building a Granny Flat means to insulate against rate rise

March 8, 2023

An article published in the Australian Financial Review (AFR) on Sunday 5 March identified a number of ways Australian households are softening the impact of more expensive rates, including building a Granny Flat.

The story covered the situation of Peta Xanthoudakis, who has spent two and half decades of her life building up a property portfolio of three houses and a commercial property. Xanthoudakis is currently facing challenges in servicing her mortgage debts, which exceed $1 million. As a result, she is exploring options to renegotiate her loans and is even contemplating fixed rates. This comes at a time when thousands of borrowers are apprehensive about significant increases in mortgage costs as their fixed terms come to an end.

a 58 year old woman having fun taking portraits in the mountains of north carolina.

According to analysis by Roy Morgan, approximately 25 percent or nearly one in four borrowers are considered to be "at risk" of mortgage stress. This means that they spend between 25 percent and 45 percent of their after-tax household income on their home loan.

With the 10th consecutive rate rise just announced by the RBA this week, it’s now well written about, that a significant number of borrowers who opted for fixed rates two years ago are now approaching a fixed rate cliff. It’s estimated that approximately $400 billion worth of fixed rate loans are set to expire this year, and Australians with fixed-rate loans are likely to experience a painful adjustment, as mortgage debt will be re-priced at much higher rates.

To illustrate the high increase in interest costs, Homebuyers who secured an average 30-year, two-year fixed-rate home loan of $540,000 in April 2021 at a rate of 1.98 percent will see an increase in their payments. When the loan reverts to the standard variable rate next month, they will pay approximately $1000 more, or around $3000 in total.

For families and investors who have spent a significant time building up an investment portfolio, they will be looking at clever moves to soften the impacts. The article in the AFR listed the following suggestions:

Contact your lender and negotiate for a lower rate. It is more cost-effective for lenders to retain existing borrowers. Lenders are especially eager to retain customers who have established equity and a solid repayment record.

Borrowers could opt to extend the term of their loan, which would lower their monthly repayments. Alternatively, they could switch to temporary interest-only repayments.

Consolidating and reducing other non-mortgage debt, such as credit card or car loan repayments can simplify debt management by combining multiple debts into a single payment.

Households are reviewing and cutting down discretionary spending such as eating out, subscription services

Exploring options to increase income is another option. This could involve asking for a pay rise, renting out a portion of a property, or constructing a granny flat to generate additional rental income.

If you would like to explore whether a Granny Flat could help your financial situation, 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.


Recent Blogs

How to Determine Bush Fire Attack Level (BAL Rating)

The Bushfire Attack Level (BAL) rating is a critical assessment that categorises the potential bushfire risk for properties in Australia, spanning from LOW to FZ, representing various levels of fire intensity and potential hazards. Use this article to do your own estimation of your potential BAL rating

Read More about How to Determine Bush Fire Attack Level (BAL Rating)

Building a Granny Flat in the Blue Mountains. Q&A with Kate Cubitt.

Explore the nuances of building Granny Flats in the NSW Blue Mountains through our Q&A with Kate Cubitt, an expert in the field. Learn about size limitations, property location restrictions, approval processes, and considerations for bushfire-prone areas. Kate also discusses the option of renting out Granny Flats and provides insights into the costs and design guidelines for these unique living spaces amidst the stunning Blue Mountains landscape.

Read More about Building a Granny Flat in the Blue Mountains. Q&A with Kate Cubitt.

Embracing the Future: Cubitt’s Passively Designed Homes Ready for Faster Council Approval

Discover a new era in home construction with Cubitts’ Passively Designed Homes. Already NCC compliant, our energy-efficient designs not only help ensure we are in the best possible position to meet Basix compliance but also offer a future-focused lifestyle. We’re ready for faster council approvals while reducing your carbon footprint and energy costs. Embrace sustainability, efficiency, and comfort—all in one place.

Read More about Embracing the Future: Cubitt’s Passively Designed Homes Ready for Faster Council Approval

Quennie: International Architect Extraordinaire with a Passion for People and Spaces

Collaborating with Quennie at Cubitt’s for Custom Design Packs or Granny Flat alterations ensures an empathetic and expert partnership. With her extensive architectural experience, Quennie excels at understanding your requirements, translating them into designs that surpass expectations. Her attention to detail and commitment to your vision guarantee a meticulously tailored outcome. Working with Quennie guarantees your ideas will come to life in ways that resonate, leaving you thoroughly impressed with the final result.

Read More about Quennie: International Architect Extraordinaire with a Passion for People and Spaces

Can You Build a Granny Flat on Lot Sizes Less than 450m2?

Want to build a Granny Flat on a less than 450m2 block? Good news! Cubitt’s can do this for you. Regulations provide avenues for approval, debunking size myths. Whether it’s a Complying Development Certificate (CDC) or a strategic Development Application (DA), explore the possibilities of smart living with Cubitt’s, even on sub-450m² lots. Your dream space awaits!

Read More about Can You Build a Granny Flat on Lot Sizes Less than 450m2?

What ROI will a Granny Flat deliver in 2023?

Discover the untapped potential of Granny Flats as a smart investment avenue in NSW and ACT. While initial returns might seem modest, these secondary dwellings hold the promise of impressive long-term financial gains, offering a compelling proposition for those seeking to build wealth strategically. We explore real scenarios, and expert insights, illustrating how Granny Flats can be a game-changer in your investment portfolio.

Read More about What ROI will a Granny Flat deliver in 2023?

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.