While the decision this week by the Reserve Bank of South Africa’s Monetary Policy Committee (MPC) to keep interest rates as they are (the repo rate at 3.5% and the prime rate remaining at 7 %), giving homeowners who are repaying bonds some extended relief, the possibility that rates will start to rise in the near future is a distinct possibility.
Adrian Goslett, regional director and CEO of RE / MAX Southern Africa, said while grateful for the move, he remains cautious about when interest rates begin their inevitable rise. Earlier this year, he said publicly that interest rates were unlikely to rise this year, but still advised homeowners to leave room in their budgets for a possible increase.
“It’s no secret that SARB Governor Lesetja Kganyago hopes the inflation target will be lowered to 3% over time, and at every MPC meeting so far, increases interest rates were mentioned. I caution homeowners and new buyers to take these warnings seriously and ensure their budgets allow for an increase of at least 25 basis points at all times, ”said Goslett.
As it stands, keeping interest rates stable will go a long way in helping debt holders cope with repayments in an already struggling economy. “The unemployment rate is at an all time high. Unless things start to change and the economy is allowed to open up further, this does not bode well for the local housing market. Rising unemployment often leads to an increase in the number of repossessed homes and an increase in the number of homeowners who are forced to downsize. Over time, that will then have a negative impact on home values, ”says Goslett.
That said, the real estate market continues to be very active and has performed better than expected since the pandemic last year. “This is a testament to the fact that no matter how poor the economy is performing, people will always need a place to live. I’m not sure if and when the real estate market will become less active and deteriorate, but what I’m sure is that those who view owning a home as a long-term investment will inevitably benefit from good returns. they made smart investment choices, ”he says.
Homeowners “should factor an interest rate hike into their budget”
Source link Homeowners “should factor an interest rate hike into their budget”