With the latest interest rate hike announced last week, says Rawson's MD,
Tony Clarke, it has become crucial for the public to re-evaluate their
spending habits.


In December last year, said Clarke, we predicted that there was a
possibility of a 4% rise in interest rates. In the light of recent figures,
it looks as if that will now come about and, in fact, our prediction may
have been conservative.


What concerns him about the current situation, said Clarke, is that it is
leading in some quarters to a negative attitude to property owning.


Our company has hammered the message that for the typical middle class
salary earner property is the road to wealth. It would be a great pity if
this ideal is now abandoned and the lower income groups revert to renting.


Clarke said that his experience with literally hundreds of buyers has shown
that people on fairly low salaries can become property owners if they cut
out spending on non-essentials.


The secret, he said, is to lower your aspirations. Start with a more
modest house or flat than you would really like. In five years time you
will be able to upscale to something better. The reason most people,
especially young people, do not become owners and continue to pay rent is
that they are determined to maintain a lifestyle that is too affluent in a
high interest rate scenario.


Having made up their minds to buy come hell or high water aspirant
owners, said Clarke, should at this point in the property cycle be
calculating their bond repayments on a 16% interest rate. That, he said,
could result in their paying more than the going rate in two years time but
it will enable them to budget accurately.


Clarke warned, as he had done before, that the new Credit Act calculates the
applicant's bond on his nett surplus income, not on 30% of his total income,
as previously.


Some people are seeing this as a complete disaster, but, as I have said,
for many families it can be perfectly acceptable provided they concentrate
on acquiring essentials (like education policies) and do not fritter money
away on luxuries, electronic goods, kitchen appliances, cars and the like.
If you have a good credit record, you will now qualify for a larger bond
than prior to the Credit Act, a fact of which many applicants are not

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