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Prepare for an Interest Rate Hike

It came as no surprise when the SARB’s Monetary Policy Committee decided to keep the repo rate at 5.75% at its May meeting.

“While maintaining the status quo wasn’t a surprise we do think it likely that the repo rate will be increased this year – if not at the MPC’s next meeting in July, then possibly in September”, believes Bruce Swain, MD of Leapfrog Property Group. Echoing this view is FNB economist, Alex Smith who has stated that the prospect of interest rate cuts are off the table, it’s now simply a question of when it will go up again.
 
Swain expects this hike as the proposed electricity tariff hike of 12.6% by Eskom (expected on 1 July if approved by Nersa) will have a tremendous impact on the local economy. Based on this and related factors analysts are predicting an increase in inflation which will prompt the SARB to raise the repo rate by a further 25 basis points.
 
Advice for Home Owners
 
“We’re in a situation where costs such as electricity and municipal rates are going up alongside the expected repo rate increase later this year. At this point I’d urge home owners to cut down on debt as much as possible while simultaneously making earnest efforts to save – things are going to get a lot tighter as the year progresses”, advises Swain.
 
He also encourages home buyers to take the possible electricity hike as well as the likely repo rate increase into consideration when budgeting for a new home so as not to end up in a situation where it’s a struggle to make the monthly repayments. 


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