From our MD: Interest Rate Announcement
Category From the Desk of the MD
We welcome the Reserve Bank's decision today to limit the increase in the repo rate to just 25 basis points, despite the fact that inflation is still very close to the upper limit of its 3 to 6 percent target range.
This takes account of the difficulties that many households are already facing as a result of steeply rising fuel, food and utility costs.
The increase brings the repo rate to 4.25 percent and the prime lending rate to 7.75 percent, which is still relatively low for SA.
However, this is the third hike since November last year, and it means that the minimum monthly repayment on a new 20-year home loan of R1m at prime will now be around R450 more than six months ago.
It also means that buyers who want to qualify for a R1m loan will need to earn around R1500 more a month now to qualify, which may be difficult in SAs current low-growth economic environment, where many companies and organizations are struggling just to retain staff at their current salaries.
The alternative for home buyers will be to purchase less expensive properties and for this reason we expect to see increased demand in the lower price bands of the real estate market, where there is already a severe shortage of stock. This will in due course place upward pressure on prices, although sellers should be aware that buyers are currently very value conscious and will not overpay even in a multiple offer situation.
Author: RealNet
