Rate increases by 25 basis points

Private Property South Africa

As expected, the Reserve Bank has announced another rate hike at today’s Monetary Policy Committee meeting, bringing the benchmark repo rate up to 7% and the prime lending to 10.50%.

The decision was made to increase the rate despite a strengthened currency and benign inflation path.

Consumers will be required to tighten their belts once again, although many may not have any notches left to tighten, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa. He notes that economists from banks around the country have warned that the rate is likely to increase by at least 2% during the course of the next two years. Considering the rising cost of utilities and food this will negatively impact the property market and affect consumer confidence.

“The Reserve Bank is still firmly on course for a cycle of rate hikes and consumers will need to ensure that they are prepared for that. Those who currently own property should pay as much extra money into their bonds as possible to lighten the load and shorten the terms of the loan. This will require homeowners to cut down on unnecessary spending and pay off short-term debt,” advises Goslett.

He adds that homeowners and potential buyers will need to make provision for the fact that the interest rates will be increasing. “Those who wish to get into the market will need to ensure that they have a sufficient buffer to be able to afford the expected rate hikes. Purchasing a home that they can only just afford will have them running into financial distress further down the road. Ideally potential buyers should also put down as large a deposit as possible, as this will give them more leverage when negotiating with banks on their lending rate,” Goslett concludes.


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