Sta­ble rates good news for home­own­ers

A chance to pay more into bonds

Weekend Argus (Saturday Edition) - - PROPERTY - BONNY FOURIE

THE MONE­TARY Pol­icy Com­mit­tee’s de­ci­sion to leave in­ter­est rates un­changed will see more homes sold, more home­own­ers able to keep up with their bond re­pay­ments, and im­prove chances of home loans be­ing granted.

The sta­ble rates will al­low some own­ers to pay a lit­tle ex­tra into their bonds, or cre­ate emer­gency funds, prop­erty play­ers be­lieve.

Last week’s an­nounce­ment to keep the prime lend­ing rate at 10.25% and the repo rate at 6.75% was wel­comed by most in the in­dus­try, who be­lieve it of­fers a sta­ble start to the year af­ter po­lit­i­cal and eco­nomic volatil­ity last year.

Bond orig­i­na­tor Bet­ter­bond says the pos­i­tive sen­ti­ment in South Africa’s prop­erty mar­ket is bound to be strength­ened by the de­ci­sion.

Chief ex­ec­u­tive Rudi Botha says more homes are likely to be sold as a re­sult. Al­ready there has been a resur­gence of buyer de­mand and an in­crease in the num­ber of home loan ap­pli­ca­tions Bet­ter­bond is re­ceiv­ing each week.

“It means that first-time buy­ers still have an op­por­tu­nity to qual­ify for a home loan at their cur­rent salary, and at a rel­a­tively low in­ter­est rate that will make their home loan in­stal­ments more af­ford­able – es­pe­cially if they have saved up a size­able de­posit.

“They will also be able to take ad­van­tage of the cur­rent buy­ers’ mar­ket in which there is a wide choice of homes to buy and prices are more ne­go­tiable. It will be eas­ier for prop­erty in­vestors to build up their port­fo­lios of rental prop­er­ties, and for ex­ist­ing home­own­ers to up­grade to bigger prop­er­ties.”

Sta­ble rates will also make it eas­ier for own­ers to keep up with their home loan re­pay­ments, Botha says.

Echo­ing this, Adrian Goslett, re­gional di­rec­tor and chief ex­ec­u­tive of RE/MAX, ad­vises own­ers to place them­selves in the “best pos­si­ble fi­nan­cial sit­u­a­tion” to mit­i­gate any eco­nomic changes in the future.

“A steady low-in­ter­est rate gives con­sumers the op­por­tu­nity to cre­ate an emer­gency fund to see them through any fi­nan­cially chal­leng­ing times they could face. It is also an op­por­tu­nity to re­duce their level of debt.”

Goslett adds that pe­ri­ods of in­ter­est rate sta­bil­ity pro­vide home­own­ers with op­por­tu­ni­ties to bud­get and pay ex­tra into their bond ac­counts to re­duce the amount of in­ter­est paid, as well as re­duce the term of the loan.

“If a home­owner has a bond of R1 mil­lion at the prime in­ter­est rate of 10.25% over 20 years, and they pay an ad­di­tional R500 into the bond ev­ery month, t hey will re­duce the term of the loan by al­most three years, and save R221 106 in in­ter­est.”

Al­though the cur­rent po­lit­i­cal tran­si­tion is un­likely to cre­ate an en­vi­ron­ment for in­ter­est rate cuts, it is help­ing to ease pres­sure on the bank to hike rates, says Pam Gold­ing Prop­er­ties chief ex­ec­u­tive Andrew Gold­ing

“Given the na­tional Bud­get pend­ing in Fe­bru­ary and po­ten­tial fur­ther risk to our coun­try’s credit rat­ing, this out­come was not sur­pris­ing, al­though it is hoped that lower in­fla­tion and a less volatile po­lit­i­cal en­vi­ron­ment will fa­cil­i­tate a move to­wards a rate cut in the near future.

“With the economy ex­pected to strengthen some­what and in­ter­est rate hikes most likely de­layed, the out­look for the lo­cal hous­ing mar­ket is more up­beat this year. Just how much better will be­come ap­par­ent in the weeks and months ahead.”

One per­son un­happy with the de­ci­sion to leave the rates un­changed is Se­eff Prop­erty Group chair­man Sa­muel Se­eff, who felt the time was right for a rate cut to stim­u­late the economy and prop­erty mar­ket. The fact that it was not, was there­fore “very dis­ap­point­ing”.

De­spite this, Se­eff be­lieves there will al­ways be ac­tiv­ity in the mar­ket as peo­ple need to buy and sell for var­i­ous rea­sons. The first few months of the year are usu­ally more ac­tive and so he urges those look­ing to sell or buy to “go ahead and do so”.

“There is no need to wait, busi­ness con­tin­ues… As the mar­ket stands right now, con­di­tions are favourable for buy­ers and it is a good time to buy,” he says.


Young peo­ple should buy prop­erty as early as pos­si­ble, in­stead of fork­ing out money on rent.

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