select
|

Rate increase an urgent signal to homebuyers

The interest rate increase announced following the July meeting of the Monetary Policy Committee was expected by most economists, and is a reminder to consumers that SA is in a rising interest cycle, and that they should prepare themselves for any debt to cost significantly more by the end of next year.
 
So says Richard Gray, CEO of Harcourts Real Estate, who notes that several small increases such as the 0,50 percentage point increase in January and the 0,25 percentage point rise announced this week are preferable to a single big “shock” increase as they give consumers time to adjust to a new financial scenario.
 
“It was obviously important, from the point of view of attracting international investment, for the Reserve Bank to stick to its stated intention of increasing rates if the rate of inflation went above the 6% level, which it did last month. The perception of such fiscal stability is vital if SA does not want to risk any further downgrades from ratings agencies such as Fitch and Standard & Poor that many investors use to gauge risk.
 
“However, it is also really important not to put too much of a damper on our own economy, which is really struggling to achieve growth, so the Reserve Bank has quite a difficult balancing act to pull off at this stage.”
 
From the point of view of existing homeowners, the rate rise will of course mean an increase in their minimum monthly home loan repayments - and will hopefully also act as an “early warning signal” and prompt them to start paying more than the minimum every month and reducing those loans as fast as they can ahead of the next rate rise, he says.
 
“Then as far as homebuyers are concerned, it is important to note that even at 9,25%, the variable mortgage rate at the moment is still very low in historical terms – and that they should not waste the opportunity to get into the market at this level.
 
“Rates are going up and every 0,25 percentage point increase in the home loan rate makes it more difficult to qualify for a home loan,on top of which home prices in most areas are rising faster than inflation now - and set to keep rising because demand is still growing faster than supply.
 
“Consequently, delaying a purchase now – provided you are in a position to comfortably afford the bond repayments – is not a sensible move, whether you are a first-time buyer or an existing owner making a change.”


  Comment on this Article

  Please login to post comments

Post to my facebook wall
  
2000
Characters remaining


    Latest Property News
    • 21 Jun 2018
      Anyone who’s ever been involved in a building project that’s gone wrong will appreciate the importance of adequate insurance cover in the construction industry.
    • 21 Jun 2018
      A recent news story about a blind tenant caught in a legal battle with his body corporate over letters and notices he was unable to read and consequently comply with has raised the question: what are the legal obligations for landlords with disabled tenants?
    • 21 Jun 2018
      A trend that’s taken the world by storm in recent years is that of hygge (pronounced: hue-guh), a Danish concept that is about creating intimacy, connecting with loved ones and taking pleasure in small, ordinary things.
    • 20 Jun 2018
      Buying or selling real estate isn’t as easy as it is portrayed sometimes, especially if there is a death of a party during the transaction which can make it awkward, tricky and inconvenient.
    • 20 Jun 2018
      With interest rates remaining at historic lows and banks continuing to compete for mortgage finance business, first-time buyers with funds at their disposal are currently well-placed to gain that initial foothold on the property ladder, particularly in the light of the slightly lower growth rates currently experienced in residential property values.
    • 20 Jun 2018
      The average size of bond granted in SA has grown 7,7% in the past 12 months to R934 000, according to BetterBond, the country’s biggest bond originator.
    • 19 Jun 2018
      In the current market, letting out a property can be a good option as rental demand remains strong, especially in the northern suburbs of Johannesburg. This is according to Chris Renecle, MD of Renprop. However he says that before homeowners let their property out, there are five key points they should make sure are covered before they market the property for rent and sign any lease agreements.
    • 19 Jun 2018
      The Capetonian dream is to live by the ocean with the iconic mountain making an appearance somewhere in the horizon. But, that dream comes with a hefty price tag that many simply cannot afford. But, should you venture some kilometres out of the city centre, entirely new realms of beachside bliss await you …
        
    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