Rates increases and property investments are both current topics under South Africans. Especially the complex relationship that these two entities have. In general, property sales are set to slow as rates rise. But amidst the questions and uncertainty there are still a lot of positive opportunities.
With the recent sharp decline in the rand exchange rate and higher-than-expected consumer price inflation at the end of December reaching 5,2% (from 4,7% in November), Reserve Bank Governor Lesetja Kganyago and the Monetary Policy Committee has decided to raise the repo rate by 50 basis points to 6,75%. According to the committee it is hoped that the rate increase would help the rand to recover by attracting more foreign investment. This should boost the South African economy and strengthen the rand against the international currencies.
The increase forced up the prime rate and variable home loan rate to 10,25% and also increased monthly home loan repayments by R33 for every R100 000 borrowed.*
“However, first time buyers will still see the benefit of 100% home loans offered by banks and with excellent first time homeowner opportunities in new developments, the dream of owning their own home will still be within their reach. We will, as always, encourage buyers to put down a deposit as this will not only make it easier for them to qualify for a loan, but lower their monthly home loan installments. Furthermore, we advise all prospective buyers to obtain pre-qualification for a home loan before they start looking for a property. This will enable them to know what they can realistically afford – saving their valuable time and effort in their home search. Also be sure to apply for your loan through a reputable mortgage originator such as EV Finance, as this will give you a much better chance of securing an approval.”*
We have seen this type of volatility in previous years and with caution in managing your financial expenses and buying within your means, there is nothing more rewarding than making the investment of owning your own home. Even though sales will be slower, there is still opportunity to qualify for a home loan and to invest in your dream home with the correct planning, saving and strategy in place.
*Information courtesy of Mortgage Max and EV Finance.