Debt holders brace themselves ahead of the next interest rate announcement to be held on 20 July 2023. Most experts predict that interest rates are likely to increase by another 25 basis points.
Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, explains that the main purpose of these interest rate hikes is to bring inflation back within the Reserve Bank’s target range of between 3-5%. “When you review the interest rate hikes alongside inflation statistics over time, you can see how each increase has had the desired effect of incrementally bringing inflation down,” he explains.
Source: https://www.statssa.gov.za/wp-content/uploads/2023/06/maycpi1.jpg
If you take a more historical view of the stats, Goslett also points out that as soon as inflation hits the MPC’s target range, interest rates begin to stabilize. “Homeowners can take some solace in this because it indicates that, if we continue to follow historical trends, then an end of interest rate hikes is most likely in sight.”
Source: https://tradingeconomics.com/south-africa/interest-rate
Goslett reiterates that, much like the economy, the property market works in cycles. “For every high – much like we experienced post-COVID – there is a low to follow, as we’ve been experiencing over the last few months. This ebb and flow is completely natural and should not be cause for concern for homeowners and investors,” he states.
Homeowners' main priority is finding ways to stay on top of their debt repayments. “Until interest rates begin to stabilize and hopefully decrease over time, homeowners will need to work carefully with their budgets to ensure that there are no late or missed payments. If the past is anything to go by, we are hopefully nearing a time of stabilization which should bring some respite to homeowners,” he states.
Those who cannot find room in their budget for the next possible interest rate hike are advised to seek help from a professional financial advisor before the following interest rate announcement occurs. “Being prepared will make all the difference when it comes to building greater financial freedom. Never be afraid to speak to the professionals and reach out for help when you need it,” he concludes.
