Interest rate remains unchanged

With inflation within its target range, the new Reserve Bank Governor, Lesetja Kganyago, who took over from Gill Marcus on 9 November, announced today at the last Monetary Policy Committee meeting of the year that the prime interest rate would remain unchanged at 9.25% for the remainder of 2014.

Adrian Goslett, CEO of RE/MAX of Southern Africa, said that the announcement brings some good news for consumers, especially over the Christmas period, as many homeowners are currently still struggling with high debt-to-income ratios. Although the Reserve Bank had warned that the interest rate was currently in a rising cycle and they were in the process of normalising the rate, inflationary pressure has eased and is currently within the target band of between 3% and 6%. Economists predict that with the recent oil price weakness inflation is likely to remain within the target band, which Goslett says is excellent news for cash strapped homeowners who should take the opportunity to make the most of this period of interest rate stability.

According to Goslett, both homeowners and potential future buyers should focus on curbing unnecessary spending and starting a savings plan of some kind. “Often during low interest rate cycles consumers are tempted to take on high-risk investment or debt and are discouraged from saving. However, where possible consumers should use this time to create a financial contingency plan so that they are not caught out unprepared when interest rates increase in the future,” advises Goslett.

While Marcus preferred to keep interest rates low, Kganyago is seen by economists as a policy hawk – with hawks generally favouring higher interest rates to keep inflation within target. Goslett says that while a hike was not justified at this month’s meeting, the likelihood of interest rates rising in the future is a possibility that homeowners should prepare for while they can.

Author: Wesley Barnard from Squared Communications.
More Info link: https://remax.co.za
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Reserve Bank Governor, Lesetja Kganyago

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