select
|

Property market unsurprised by unchanged repo rate

Although inflation is currently on the rise and economic growth is under pressure, the Monetary Policy Committee has decided to leave the interest rates untouched for the time being. The prime lending rate will remain at 9.25%, while the repo rate remains at 5.75%.
 
Current economic factors, such as the rising inflationary pressure, must have made the decision a tough one, with any of the three possible policy options a prospect. However, keeping the rates unchanged for a while longer seemed the most practical at this stage and is welcome news for consumers, even if only for the next two months.
 
While a cut in the rate would temporarily boost the economy and relieve some of the financial burden that many consumers and households are currently carrying, the move would weaken the rand. A weakened rand would only increase inflationary pressure, pushing the rate of inflation outside of the target zone, which would in turn force the Reserve Bank to increase the rates to counteract this. Conversely, a hike in the rates would result in a strengthened rand but would also hurt consumers and damage economic growth further.


Although the Reserve Bank does not want to constrain consumer spending, they also don’t want to keep inflation pressure from exceeding the projected goals and targets. Rate increases will have the desired impact on inflation, but will place a lot of strain on consumers. Many consumers are already dealing with high debt levels and the increasing cost of living. Things such as impending electricity price hikes will affect the majority of consumer’s lives and most likely impact on their ability to afford non-essential items. Any further financial constraints will have homeowners stay in the homes they are currently in or downgrade to smaller, more affordable homes where possible.
 
Economists predict that the global interest rate trajectory will remain flatter for longer, which will probably keep the rates where they are until a hike is seen in the US, which is expected to happen around the middle of this year. The Reserve Bank will likely follow suit, so consumers should expect a hike before the year is over.
 
Those who can afford to do so should take advantage of the interest rate stability we have experienced and pay down debt to prepare for future hikes.

Kay Geldenhuys, manager of property financing processing at ooba says this a huge relief for the property market.
 
ooba, South Africa’s largest bond originator, was unsurprised at the South African Reserve Bank’s decision today to keep the interest rate unchanged, given the current subdued economic growth prospects.    The decision is a great relief to South African property owners and the relatively low and stable interest rate environment that continues to prevail is good news for the residential housing market as it gives prospective home buyers an opportunity to acquire property and secure home loan finance at an affordable cost of credit.  The South African property market outlook for 2015 remains positive with steady house price growth, stable and relatively low interest rates and increased lenders’ confidence, evidenced by the current trend of  higher home loan approval rates recorded by ooba,” says Geldenhuys.


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 20 Apr 2018
      Whenever changes in the political ecosystem of a traditional property market create uncertainty, smart investors begin to look elsewhere for new opportunities. Property experts at IP Global have analysed the trends and crunched the numbers to find new markets to explore in Europe and the United States.
    • 20 Apr 2018
      Energy and water self-sufficiency are increasingly important factors in home buyers’ choice of property – especially in Cape Town where the extreme drought of the past few years has made municipal supply costly as well as uncertain.
    • 19 Apr 2018
      During the last decade, rampant development has progressively transformed Cape Town’s property landscape with densification being the order of the day, but there are still one or two hidden gems like Scarborough which have retained their original character, offering an inimitable lifestyle and an attractive investment opportunity.
    • 19 Apr 2018
      The rental market is a cut-throat sector of the real estate market that waits for nobody. According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, first-time renters need to be fully prepared before they even start the process of looking for a place to rent in order to avoid the disappointment of losing out on their ideal property.
    • 19 Apr 2018
      Choosing to buy your first home instead of continuing to rent is a big decision that will usually take some time to put into action, but the sooner you can save up a sizeable deposit, the closer you will be to reaching your goal.
    • 18 Apr 2018
      Selling your home is no small task and as you will quickly find out, there are a lot of misconceptions about the process. Gerhard van der Linde, Seeff's MD in Pretoria East lists the top 5 misconceptions when you are selling your home.
    • 18 Apr 2018
      The Cape Town municipality is now installing water-management devices at properties that have been non-compliant with the new level 5 water restrictions and there are talks of fines between R5,000 and R10,000 for households that use too much water.
    • 17 Apr 2018
      The recent interest rate cut has stoked the coals in the first-time buyer’s market. At least for the next two months until the next interest rate announcement, homeowners are guaranteed lower monthly instalments than in the previous quarter. But, is it wise to take out a 100% bond just to enter the property market while interest rates are low?
        
    X
    Subscribe to the MyProperty Newsletter

    Name  
    Last Name  
    Email Address  
    Email Frequency
    select
    X
    Share this Page

       
    For Sale Property
    Rental Property
    More Options
    About
    Connect with us
    FEEDBACK