Interest rates remain unchanged… for now

Image of housing inflation conceptYou don’t have to hold your breath any longer. Interest rates will remain unchanged, said Gill Marcus, Governor of the South African Reserve Bank, yesterday when she announced the decision of the monetary policy committee (MPC).

In a split decision, the MPC decided to keep the repo rate unchanged at 5.5%, which, of course, is great news for anyone with debt to repay. The major commercial banks have already indicated that they will keep their prime lending rates unchanged at 9%

This comes after the shock decision of the MPC in January this year to increase the repo rate by 50 basis points (or half a percent).

The trend is up

Unfortunately it’s not all good news. Marcus also warned consumers to plan ahead so they’ll be able to afford credit repayments if and when interest rates are hiked in future.

“We are indicating that the interest rates are likely to rise in the future,” said Marcus.

How much will the interest rates rise? Dave Mohr, Chief Investment Strategist of Old Mutual Wealth, said that consumers should be prudent and allow for at least one percent in interest more by the end of the year.

If you were wondering if interest rates were trending up or down for the foreseeable future, Marcus said, “We do not see reducing rates on the cards at this time.”

What does this mean for the property market?

For now, nothing. Rates remain unchanged for now so it will have no bearing on bond repayments until the next meeting of the MPC in May.

However, as a prudent property professional you will have to make sure that your buyers are able to afford their bond repayments at current rates, but also at a rate of at least 1% higher.

This being said, when advising clients make sure that you have the correct information at hand. Often you’ll find that sentiment – and not fact – sways the markets. Be careful not to react in an emotional manner to prime lending rate increases and cuts.

At this stage, it is still a great time to invest in residential property before prices and building costs rise.

Online course – Residential Rentals for property practitioners

Interest rates even have an effect on residential rentals. Check out our free guide on 17 of the most important things estate agents should know about residential rentals (but don’t always).

 

Tags: , , ,

No comments yet.

Leave a Reply

Get Updates

Insider's access to free training, discounts, updates
and more
JOIN NOW