Forgotten Aussie group whose mortgage will get worse in 2025 despite interest rate cut
Even though the RBA has cut interest rates, there are thousands of Australians doing vital work for the nation that are facing a grim reality.
Melbourne couple Nicole Lawler and George Boakye will watch their mortgage get bigger this week, even thought the Reserve Bank cut interest rates.
They’re among the thousands of Australians part way through building a new home, who face the reality that their mortgage will become bigger as construction progresses — even as others’ loans become cheaper.
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Ms Lawler said the rate cut would soften the blow of their next progress payment due on Thursday, but the next few months would be a “struggle” as they juggled paying rent as well as a mortgage for their future home in Weir Views to Melbourne’s west.
“We are both working full time, and it’s just killing us, we don’t have the money to go out for dinner or away for a weekend — we used to do that all the time,” Ms Lawler said.
“We don't get to spend quality time together as we are working so much just to survive.”
With Mr Boakye working up to seven days a week, they’re not expecting much relief until their four-bedroom Burbank build that will “probably be better than our dream home” is completed around June.
She added that with the state government hoping to have 80,000 homes built a year over the next decade, further support was needed for those willing to take on the financial risks — especially those also paying rent.
Burbank national sales and marketing general manager Anthony Garubba said the Melbourne family were among thousands in a similar situation, and that it would take multiple rate cuts to ease their financial pain.
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Mr Garubba added that multiple cuts could also help entice prospective homebuyers to build a new home — and help ease the housing crisis.
Australian Builders Collective president Phil Dwyer said it was all too easy for those building homes today to be forgotten, even as they faced extreme financial difficulty to help the nation tackle its housing shortfalls.
“I think we probably should be helping these people out,” Mr Dwyer said.
“There’s a lot more to it than just the cut. There’s all these people it won’t really benefit, because of the progress payments.
“So it needs a good think around all of this. It’s certainly just not something that will resolve itself.”
Property Council of Australia policy and advocacy group executive Matthew Kandelaars said it was clear that with cost of living pressures headlined by housing affordability, it was clear it was now the most important issue for the average Australian.
“Helping more Australians into homes should be everyone’s highest priority,” Mr Kandelaars said.
“And it’s important that we streamline the construction process to get those homes built quickly.”
He added that with up to a third of the cost of building a new home tied up in state government taxes and fees, it was important for governments at all levels to look for ways to address the affordability challenges being faced by Australians wanting to build a home.
WHAT A CUT MEANS FOR HOMEBUYERS BETRAYED BY RBA
Meanwhile, Aussie families who bought at the peak of the market in 2021 after reassurance from then Reserve Bank governor Phillip Lowe that interest rates would not rise until 2024 are about to experience the first cut since they bought a home. However, it is unlikely to make “much of a difference right away”.
Sarah Finlay and her partner bought their home in Wyoming, near Gosford in NSW, in December 2021.
Less than six months later, the Reserve Bank began to hike interest rates, two years earlier than they had indicated was likely.
The Finlays dodged the worst of the increased repayments thanks to a decision to lock in an about 2.2 per cent fixed rate for the majority of their mortgage in a three-year term.
But that term ended just before Christmas last year.
“That was a shock, the increase in our repayments was about $1160 a month,” Ms Finlay said.
“Thankfully out pay has covered it, and we had saved ahead of it.”
But the pair quickly took action to refinance their loan pursuing a lower variable interest rate than the one they were rolled onto.
“So we tried to secure a lower rate that way, but the reduction will mean close to $100 off for our monthly mortgage payments — which will be welcome,” she added.
Now with two young children, aged one and three, the family are expecting the savings from the first interest rate cut since they bought their home just over three years ago will go towards day-to-day and weekly expenses.
They don’t believe they will be able to follow expert advise to keep paying it off their mortgage in order to build a buffer.
“But I have been reading that by the end of the year interest rates should be coming down more substantially, and that will be when people do see more relief,” Ms Finlay said.
“So while it won’t be that much of a difference straight away, by the end of the year things will be better.
“And, down the track, when the kids are out of day care, which is expensive, we will look at managing it a bit better.”
Their 30-year-loan term still has a little over 26 years left in it.
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david.bonaddio@news.com.au
Originally published as Forgotten Aussie group whose mortgage will get worse in 2025 despite interest rate cut
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