Renovating your home during interest rate increases
You might be wondering about the current interest rate rises and whether it is the right time to renovate. Interest rates have been rising in Australia for the last 12 months, and this can have an impact on your decision to renovate your home. In this blog, we will discuss the current interest rate rises and whether it is the right time to renovate your home.
Firstly, let's take a look at the current interest rate rises. The Reserve Bank of Australia (RBA) has been gradually increasing the official cash rate, which has resulted in higher interest rates for borrowers. In November 2021, the RBA raised the official cash rate by 0.25 percentage points to 0.5%, and they have been climbing ever since, to where we found ourselves today in 2023. This means that borrowing money for a home renovation will be more expensive than it was a few years ago.
However, despite the interest rate rises, there are still some benefits to renovating your home earlier rather than later, and we believe that these benefits far outway the hurdles.
What are the benefits of renovating my home?
Every scenario is different, you may be looking at renovating your home, an investment or setting up an Airbnb. But renovating your home can increase its value, which can be a good investment in both the short and long term. A well-executed renovation can also improve the functionality and aesthetics of you home, making it a more enjoyable place to live.
Is it the right time to renovate my home?
The answer to this question depends on your personal circumstances. If you have the funds available to finance a renovation, and you plan to live in your home for several years, then it may be a good time to renovate. Remember that if you are on a variable interest loan, your interest rate on the loan will move with the changes, and you will have a newly renovated home.
If you are planning to rent out or sell your home in the near future, it may also be a wise time to renovate. However if you are not in a good position to renovate right now, then perhaps waiting a year or two may be best suited to you.
A big factor to consider is the stage of life you are in. If you have a family and your lifestyle is important, it would be a shame to continue to wait for an ideal scenario, when you don’t know what challenges you may face in the future. As mentioned above, on a variable loan you may be able to get the value added to your home, and then appreciate changes to interest rates in future.
5 more reasons you may want to renovate, despite higher interest rates
1. Low home equity
If you have low home equity, a renovation loan may be a good option for you. Even with high interest rates, a renovation loan may be more accessible than other types of loans because the value of your home will increase with the renovation.
2. Long-term benefits
Renovating your home can have long-term benefits, such as increased energy efficiency or improved functionality, which can ultimately save you money in the long run. If the renovation will provide long-term benefits, it may be worth the investment even with high interest rates.
3. Avoid moving costs and hassle
If you are considering moving to a new home, the costs of moving can add up quickly. Renovating your current home may be a more cost-effective option than moving to a new home, even with high interest rates.
4. Personal enjoyment
If you plan to stay in your home for the long term, renovating your home to meet your personal preferences and style can be a worthwhile investment. Even with high interest rates, the enjoyment and comfort you get from living in a home you love may outweigh the cost of the renovation.
5. Time sensitivity
If the renovation is time-sensitive, such as if you need to make necessary repairs or upgrades, waiting for interest rates to go down may not be an option. In this case, renovating your home despite high interest rates may be necessary.
Ultimately, whether it’s the right time to renovate your home depends on your personal circumstances and the current state of your home. It is always a good idea to consult with a professional builder and financial advisor before making any major decisions.
If you’re looking for a local Northern Beaches renovation builder, get in touch with Above Building today! We will help talk you through the renovation process and will work with you to create the perfect home for your family within your budget.