Comment on interest rate announcement

Despite previous warnings from the Reserve Bank that the public could expect further rate hikes towards the end of the year, it was decided at this month’s Monetary Policy Committee meeting that the interest rate would remain at its current figure. The prime lending rate will stay at 9.5 and the repo rate will remain at 6%.

Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, says that the decision to keep the rates where they are will be a relief to homeowners and consumers who are still coming to terms will the last rate hike and the rising cost of living. He notes that financial pressure from external sources such as higher food prices, higher electricity and water tariffs and a weaker Rand-Dollar exchange rate has had an impact on the property market over the last few months. Consumers are having to deal with their expenses increasing, while their income remains the same. This will make it harder for homeowners to hold onto their properties and for potential buyers to get a foot into the market.

Although the recent lower oil prices could moderate inflation to some degree, the weaker currency against the Dollar has caused inflation to edge closer to the upper end of the Reserve Banks’s target band of 6%. If this continues, we are likely to see rate hikes in the near future, be it in November or early next year. “Inflationary pressure will strengthen the Reserve Bank’s position to hike the rates. Homeowners and consumers need to prepare for future rate hikes by reducing household debt and increasing savings,” says Goslett. “While higher interest rates will impact potential buyer’s affordability ratios, the higher rates can also prove to be an advantage to those who are building up their savings for a deposit and other costs associated with a property purchase.”

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