The Monetary Policy Committee is set to meet to deliver the news of what is most likely to be yet another interest rate hike. At the previous meeting in July, the MPC increased rates by a substantial 75 basis points. The country now waits in bated breath ahead of the next interest rate announcement to be held on 22 September at 3pm.
Since the July meeting, new stats reveal that annual consumer inflation has reached another 13-year high, increasing to 7,8% in July from 7,4% in June. At their previous meeting, the MPC stated that: “The aim of policy is to stabilise inflation expectations more firmly around the mid-point of the target band and to increase confidence of hitting the inflation target in 2024. Guiding inflation back towards the mid-point of the target band can reduce the economic costs of high inflation and enable lower interest rates in the future.”
With this in mind, Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, predicts that interest rates will most likely increase further at the September meeting. “To combat rising inflation, we are likely to experience another big increase from the MPC in September, possibly somewhere between 50 basis point to a full percentage increase,” he predicts.
If this is the case, Goslett mentions that interest rates would then resemble the pre-COVID levels of around 10% (prime). “Although not quite as active as it is now, the pre-pandemic housing market was still performing well even with interest rates being at around 10%. Considering this, combined with the fact that our sales volumes have not yet been affected by the previous hikes, l remain optimistic that the property market will not be too badly affected by rising interest rates,” says Goslett.
He adds that established homeowners who owned property before 2020 were able to afford the repayments at the higher interest rate and are likely used to the fact that interest rates change over time. “My concern is around the many first-time home buyers who entered the market when interest rates were at an all-time low and who might be unfamiliar with the fact that interest rates change often over the span of a twenty-year loan term. For these kinds of homeowners, I would encourage them to do the necessary repayment calculations ahead of the next MPC meeting to make sure they can afford the higher repayments,” he advises.
For those who are still hoping to enter the market, Goslett explains that rising interest rates should not deter them. “A well-thought out real estate purchase is always a sound investment decision and interest rates will eventually stabilise again. The sooner you are able to enter the market, the sooner you will benefit from owning an appreciating asset that can help you generate future wealth,” he concludes.
Writer : Kayla Ferguson