select
|

Plan for possible future rates increases when buying a home

The Reserve Bank’s decision to retain interest rates at the present levels is obviously welcome for home owners, but the long term prognosis is that rates will gradually rise and property stakeholders should plan accordingly.
 
So says Gerhard Kotzé, CEO of the ERA property group. His views are based, in part, on comments by the Director of Standard Bank Home Loans, Funeka Ntombela, who was the keynote speaker at the recent ERA South Africa 2010 awards ceremony.
 
Ntombela outlined to a rapt audience her prediction of a continued upturn in the property market. But at the same time she hinted at the likelihood of future increases in interest rates, due amongst other reasons, to South Africa’s future borrowing requirements.
 
Adds Kotzé: “The last property bubble was fed partly by low interest rates as well as by unfettered lending  and the ‘securitisation’ or bundling  of mortgage bond debt into dubious financial instruments, much of it being of low quality.
 
“Consumers played their part in that they acted in the belief that cheap money would remain available indefinitely.  This proved not to be the case and while I am all in favour of low interest rates, I believe caution should always be the watchword.
 
“The banks themselves are setting the tone in this respect with their conservative lending policies of the moment, but home buyers and sellers should also play their part by borrowing conservatively.
 
“That implies the need either for increased deposits, if at all possible, when buying a home, thus reducing the size of the bond and the associated repayments or buying less expensively on the understanding that building up a stake in property is a gradual process.
 
“Fundamentally it’s about avoiding a repeat of the situation where, as a result of the credit crunch, interest rates soared by five or six percent and home owners were severely stretched financially.  
 
“The joker in the pack right now is that in a rare show of collaboration, the trade union Cosatu and the business sector, are jointly campaigning for a weakening of the rand, which would imply the possibility of lower interest rates. But don’t hold your breath would be my advice!”   
 
Issued by ERA South Africa


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 25 Apr 2018
      Whether you are a seasoned seller or new to the game, putting your home on the market is an exciting moment. To ensure you get the best possible outcome these 8 value adding additions to your home is worth the effort.
    • 25 Apr 2018
      After four years of unprecedented growth fuelled by semigration, the Southern suburbs market faced a number of challenges in 2017, including dwindling affordability and a marked slowing in house price growth with many sellers forced to lower their prices in order to secure a sale.
    • 25 Apr 2018
      Mall of Africa, is celebrating its second year of sensational success. This splendid super-regional shopping centre first opened on 28 April 2016, and has grown in popularity, performance and profile since then.
    • 25 Apr 2018
      While the role of trustee in a sectional title scheme is a voluntary and unpaid position, it is one that comes with huge responsibility. Trustees have a fiduciary duty towards their scheme, says Chinelle Hewit, Operations Manager at sectional title finance company Propell.
    • 24 Apr 2018
      The thing about the property ladder is that at some point in our lives we all have reason to want to climb a rung or two higher. Sometimes, it’s because we’ve outgrown our previous dream home, or because we want to be in a better neighbourhood that’s closer to work or to schools. Sometimes it’s because our circumstances have changed, and we’re taking care of elderly parents or relatives. Sometimes, it’s just because we want a property that reflects the financial status our hard work has won.
    • 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.
        
    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