DREADED RATE HIKE ARRIVES

The climbing interest rate now stands at the dreaded 15%. Deon Lessing,
marketing director of Betterbond, views the decision to raise interest rates
by half a percent as unfortunate, but rather expected.

“From a property point of view, the impact will continue to be felt as this
rate increase builds onto the preceding increases. I believe this increase
will push the declining rate of growth in house prices even lower than
previously anticipated,” comments Lessing.

“South Africans have already experienced tremendous amounts of pressure in
light of the rising fuel prices, the new property tax, looming increases in
electricity prices and rising food costs,” says Lessing. With the interest
rate having risen once again, consumers must exercise discipline and manage
their debt better.

“In light of numerous rate hikes experienced thus far, South Africa is
dealing with a correcting market, whereby property will move back into a
more realistic price range,” says Lessing.

Household spending data over the past months indicates that consumers are
feeling the strain of the higher interest rates. Real household spending is
therefore likely to be significantly weaker in 2008 on the back of very high
debt servicing costs, weaker real income and high fuel prices.

“Consumers should refrain from taking on any additional debt. The best
approach is to speak to your bank or mortgage originator about your
financial situation and consolidating your debt sooner rather than later,”
concludes Lessing.
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