Construction loan rates are being set in Australia for the first time in a decade.
The Bank of Australia says that the rate for new construction is set to rise to 2.50 per cent over the next three years.
A key part of the bank’s review into the industry is a study that examines how construction loans are paid for and the impact of inflation on them.
The research found that construction loan rates have been flat or fallen over the past decade.
“The construction loan rate is set by the government in order to make sure the construction industry is managed in a fair and sustainable way,” the Bank of England said in a statement.
“This provides a strong incentive for developers to secure construction loans and ensures that there is sufficient funding for construction work.”
In the meantime, construction loan companies will need to find other ways to pay for construction projects.
“We have to consider the needs of construction companies, which can include financing and costs of servicing and servicing loans,” the bank said.
“It’s important that construction companies are able to access additional funding from other sources, such as the mortgage market.”
If you need a loan now, contact a construction company to find out how.
Read moreThe Australian Construction Loan Corporation (ACLC), which manages the construction loan industry, says the cost of servicing construction loans is expected to be about 10 per cent of a project’s cost.
The ACLC says this will give borrowers an incentive to get more of their money back.
“In the absence of new funding from the construction sector, borrowers will be able to pay down their construction loan debt and access additional financing,” it said in the statement.
The construction industry in Australia was worth $2.3 billion last year.
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