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Rate increase to affect residential housing market

The South African Reserve bank, under governor Lesetja Kganyago, announced this week an interest rate hike of 25 basis points; an increase from 5.75% to 6%.
 
ooba, South Africa’s largest bond originator, says that the announcement to increase the interest rate by 0.25% could negatively impact the residential housing market.
 
“Many consumers are already dealing with elevated levels of debt and the rising cost of living expenses.  The repayment on an R1 million home loan over a 20-year period will now cost the homeowner an additional R163 per month, which adds up to an extra R1956 per year. Housing affordability will, therefore, become more constrained for prospective homebuyers as a result of this latest rate increase,” says Kay Geldenhuys, ooba’s property finance processing manager.
 
Kganyago painted a picture of a constrained economic outlook, citing the recent heightened uncertainty relating to the debt crisis in Greece and the sharp decline in equity prices in China as contributing factors. Locally, he cited the electricity supply constraints and weak business and consumer confidence as contributing factors to a cautious domestic growth outlook.


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