Stable repo rate a lifeline for droves of homeowners about to lose the roofs over their heads

The decision to keep the repo rate unchanged is good news for first-time homebuyers and existing homeowners. Picture: Ketut Subiyanto/Pexels

The decision to keep the repo rate unchanged is good news for first-time homebuyers and existing homeowners. Picture: Ketut Subiyanto/Pexels

Published Nov 23, 2023


The South African Reserve Bank’s (SARB) decision to keep the repo rate steady at 8.25 percent has been welcomed by property professionals.

As higher rates dampen property buying activity and put existing homeowners under increasing financial strain, Samuel Seeff, chairman of the Seeff Property Group, says keeping the rate unchanged is “great news” for both the economy and real estate market.

“While we would have preferred a small rate cut as a boost heading into the busy season for retail and real estate, we are nonetheless pleased at the Bank's decision, especially given the inflationary pressure.”

The prime lending rate remains at 11.75 percent, sparing homeowners the added pressure of higher bond repayments and giving much-needed relief to many debtholders who are struggling to keep up with repayments.

Given that inflation has increased, Adrian Goslett, regional director and chief executive of RE/MAX of Southern Africa, says it is “understandable” that interest rates would have had to either remain steady or be increased to keep inflation in check. Therefore, the decision to keep them steady is a relief for the property market as many homeowners are already starting to reach out for help to cope with the higher home loan repayments.

“According to our distressed property sales division, compared to the same period in 2022 to year-to-date November 2023, there has already been a 40 percent increase in the number of mandates received from the banks’ distressed property programs. What’s more, there has been a 160 percent increase in the number of clients our agents have referred to their banks for assistance in signing up to their distressed programs.”

Given the current economic outlook, the hope is that interest rates will at least hold steady for the next few months, but Goslett warns that the possibility of further interest rate hikes still exists.

“My advice to consumers at this time is to manage their debt levels closely and to reach out for help if they notice that they are in over their heads.”

After a year of inflationary pressures and interest rate hikes, bond originator BetterBond welcomes the MPC’s decision. Head of sales Bradd Bendall says there are already encouraging signs of positive shifts in the property market, with increased quarter-on-quarter house price inflation in sought-after provinces and home buying activity across all age groups.

“With consumer price inflation now comfortably within the Reserve Bank’s targets, and an improvement in the employment rate, we’re optimistic that the end of the current rate-hiking cycle is in sight, and we can look forward to lower interest rates in 2024.”

After initial concerns that renewed inflationary pressures would prompt the MPC to hike interest rates once more at this week’s MPC meeting, Dr Andrew Golding, chief executive of the Pam Golding Property group, says the decision to not do so indicates that the current interest rate cycle has peaked.

In the housing market, this is “certainly good news” for interest-rate-sensitive first-time buyers whose home loan application approval levels continued to decline in October.

“It is also positive for existing homeowners with mortgages or those seeking credit in order to downsize, upsize, or simply relocate in accordance with changes in lifestyle or other requirements.”

The rising cost of living and series of interest rate hikes have weighed on local household incomes, and with price pressures easing and the prospect of interest rate cuts on the horizon – plus some easing of the severity of load shedding, he says this should go “some way towards galvanising the local housing market in early 2024”.

Tyson Properties chief executive Nick Pearson says the unchanged repo rate will be “a good thing” for both buyers and sellers, and might just provide the property market with some much-needed extra confidence.

“We had a strong start to the year, but the past three months have been a little slower. I think that, if we now get a levelling-off period, a gap during which things can settle a bit, it will certainly stimulate the economy. Hopefully, by the middle of next year, we will see one or two decreases in the interest rate.”

Interest rates reached their lowest ever during the pandemic, which Tyson founder and chairman Chris Tyson says tempted many first-time homeowners into the market. However, since November 2021, bond repayments have increased steadily on the back of continued interest rate hikes.

“This has put massive pressure on those repaying bonds whilst also having to contend with climbing food and petrol prices, and shrinking disposable incomes.”

Rhys Dyer, chief executive of ooba Home Loans, says the rate hold is welcomed, but “urgent intervention” is needed to re-stimulate home buying activity in a contracting market environment.

“While low house price inflation allows for great investment opportunities, home buying activity is currently in a lull, and the effects of a high interest rate environment are being felt by the industry and consumers alike.”

Pegging interest rates at their current levels is definitely a step in the right direction for the property market right now, says Leonard Kondowe, finance manager for Rawson Property Finance.

Should the interest rate go up in future, property, along with other markets, will feel the pinch.

“There are already huge numbers of homeowners struggling to make ends meet, and any further interest rate increases will only exacerbate those issues. The distressed property market is busier than ever, but the lack of affordability means the pool of qualified buyers is also very small. Anything that erodes affordability – whether that’s fuel price hikes, cost of living expenses or interest rates – is going to chip away at that pool even more.”

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