Blow for home buy­ers

In­ter­est rate hike means tighter belts

Weekend Argus (Sunday Edition) - - FRONT PAGE - VI­VIAN WARBY Prop­erty360.co.za

THE fresh in­ter­est rate hike at a time when the econ­omy is al­ready weak will con­tinue to dampen con­fi­dence in the prop­erty mar­ket and sus­tain its grad­ual cor­rec­tion, says FNB econ­o­mist John Loos.

The Re­serve Bank’s Mon­e­tary Pol­icy Com­mit­tee (MPC) hiked the repo rate by 25 ba­sis points to 6.75% (from 6.50%), in­creas­ing the base home loan rate to 10.25% (from 10%).

The hike, agrees Mike Gre­eff, chief ex­ec­u­tive of Gre­eff Christies In­ter­na­tional Real Es­tate, will con­trib­ute to the slow­ing of the prop­erty mar­ket.

“It will prob­a­bly be felt the most by the lower and mid­dle sec­tors of the prop­erty mar­ket.

“Lend­ing in­sti­tu­tions will in all like­li­hood im­ple­ment more strin­gent lend­ing mea­sures which would most likely have a damp­en­ing ef­fect on new bond ap­pli­ca­tions from first-time buy­ers.”

Rudi Botha, chief ex­ec­u­tive of bond orig­i­na­tor Bet­terBond, says the rate in­creases will make it more dif­fi­cult for first-time home buy­ers. “They will most likely ei­ther have to post­pone their pur­chase or opt for a cheaper home…”

Hard-hit con­sumers will now have to dig deeper to not only fork out more for in­creased monthly bond re­pay­ments, but also higher monthly re­pay­ments on ev­ery other form of debt, in­clud­ing car finance, credit cards, store ac­counts and per­sonal loans.

Botha says for home­own­ers with bonds, the in­ter­est rate in­creases will add at least R16.60 per R100 000 bor­rowed to their monthly re­pay­ment.

“So on a 20-year loan of R1m, for ex­am­ple, the monthly in­stal­ment will rise by at least R166 and pos­si­bly more, de­pend­ing on the cur­rent in­ter­est rate that the bor­rower is pay­ing.”

Com­ing on the back of an un­sur­pris­ing in­fla­tion rate in­crease to 5.1% in Septem­ber (from 4.9% in Au­gust), “this sug­gests a pretty lean fes­tive sea­son for most house­holds – and is all the more rea­son for con­sumers to watch their ‘Black Fri­day’ and Christ­mas spend­ing very care­fully”.

Given that the hike came into ef­fect on Black Fri­day, and weeks be­fore the Christ­mas sea­son, when re­tail­ers hoped to boost ail­ing sales, it her­alds a bleak pe­riod for re­tail­ers and con­sumers alike.

Adrian Goslett, chief ex­ec­u­tive and re­gional di­rec­tor of Re/Max, urged con­sumers to prac­tise “care­ful fi­nan­cial dis­ci­pline to make sure they get through this Christ­mas sea­son with­out leav­ing a dark mark on their credit record”.

Home­own­ers and buy­ers will need to con­tinue tight­en­ing their belts as the eco­nomic and prop­erty mar­ket re­cov­ery takes longer than hoped, agrees Stu­art Man­ning, chief ex­ec­u­tive of the Se­eff Prop­erty Group.

Mean­while An­drew Gold­ing, chief ex­ec­u­tive of the Pam Gold­ing Prop­erty group, says there are still in­fla­tion risks “which may in­cline the MPC to­wards con­tin­u­ing on a mod­est hik­ing cy­cle in the New Year”.

AYANDA NDAMANE African News Agency (ANA)

SHOP­PERS flood the aisles for Black Fri­day deals at Game, Canal Walk shop­ping mall. The day has be­come a hit with South Africans, with many camp­ing out­side their favourite stores be­fore open­ing times so they don’t miss out |

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