The RBA may be sitting still for now, but fixed home-loan rates certainly aren’t.
A number of lenders have recently reduced their fixed rates ahead of the next RBA meeting. That sounds like welcome news—and it can be—but for buyers building a new home, there’s a little more to consider before locking anything in.
Construction loans are released progressively, which means the fixed rate advertised today may not necessarily be the rate available when the loan is fully drawn. Lenders can also take very different approaches to fixing a loan during construction.
In this week’s update, I’ve broken down why fixed rates can move before the cash rate and what buyers should check before choosing a construction loan based on the headline rate alone.
What Does It Mean for Construction Loans?
Fixed home-loan rates have started moving lower, with a number of lenders making cuts ahead of the RBA’s next cash-rate decision.
It is a positive sign for borrowers looking for greater repayment certainty, but it does not mean the RBA is about to cut rates. Fixed rates are influenced by several factors, including lenders’ funding costs, financial-market expectations and competition between lenders.
This allows lenders to adjust their fixed rates independently of changes to the official cash rate.
Construction Loans Work Differently
A standard home loan is generally advanced as one amount at settlement. Construction loans, however, are progressively drawn as the builder completes agreed stages such as base, frame, lock-up, fixing and completion.
During construction, interest is generally calculated only on the amount that has been released. This means the loan balance—and the buyer’s repayments—gradually increase as the build progresses.
The ability to fix the interest rate will depend on the lender and loan product. Some lenders may offer fixed-rate options during construction, while others may keep the loan variable until the build is complete.
Rate-lock arrangements can also differ. A fixed rate displayed when the buyer applies is not necessarily guaranteed unless an eligible rate lock has been arranged—and some lenders do not offer rate locks for progressively drawn construction loans.
What Buyers Should Check
Before choosing a lender based on an advertised fixed rate, construction borrowers should understand:
- Whether the loan can be fixed during construction
- When the fixed rate will take effect
- Whether rate lock is available for progressive drawdowns
- What happens if construction takes longer than expected
- How repayments will increase as funds are released
- Whether the loan can be split between fixed and variable portions
- What restrictions apply to additional repayments, redraw or offset accounts
The lowest advertised rate may look attractive, but the loan also needs to work with the building contract, progress-payment schedule and expected construction timeline.
For builders and housing industry partners, recent fixed-rate reductions can create a positive reason to reconnect with buyers who have been watching rates and waiting for greater certainty.
However, it is important that buyers understand how the rate applies to their particular construction loan—not just the number shown in the advertisement.
If a client is comparing fixed rates, send them our way and we can check how different lenders treat the construction period, when the fixed rate would apply and how their repayments may change throughout the build.
After all, a competitive rate is only useful if the loan is structured to keep the build moving.
Interest Rates
VARIABLE
These rates are variable and based on a $500,000 loan with principal and interest payments over 30 years (as of May 2026):
1 YEAR FIXED
The rates below are 1-year fixed rates based on a $500,000 loan, with principal and interest payments over a 30-year loan term (May 2026):
