Interest rate increases by 25 basis points

As forewarned by Reserve Bank Governor, Gill Marcus, the interest rate has been increased by a further 25 basis points bringing it up to 9.25%. The increase comes at a time when consumers are already facing increasing living costs and is likely to place more financial pressure on potential homebuyers who are eager to get into the market, says Adrian Goslett, CEO of RE/MAX of Southern Africa.

“Many cash-strapped South African consumers are already dealing with high debt levels, so increasing the rates will only make things more difficult for the remainder of 2014. If possible, those who can should try and reduce their debt levels as much as possible before the expected further rate increases kick in later this year. Especially consumers who are planning to purchase property and need to show the banks required levels of affordability,” advises Goslett. “The monetary policy committee (MPC) has reiterated that we are currently in a rising interest rate cycle so consumers can expect the rate to see further increases. However, this does not mean that the rate will increase every meeting or by the same margin each time.”

He notes that while consumer sentiment in the property market has seen growth over the past few years, future rate increases will delay many potential homebuyers from taking the leap. “Although homeownership is a goal for many South Africans, the increasing cost of obtaining finance will make it extremely hard for those who have not taken the provisions to prepare for purchasing a property. This doesn’t mean that consumers will let go of their homeownership dreams, it simply means that those wanting to buy a home will have to take the necessary steps now to ensure their goal can be reached in the future. Their focus will need to be decreasing debt levels and increasing savings,” Goslett concludes.

Author: Wesley Barnard from Squared Communications.
More Info link: https://remax.co.za
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