Durban - Governor of the SA Reserve Bank Lesetja Kganyago announced in Pretoria on Thursday that the bank would raise the repo rate to 6.75% from 6.5%. The prime lending rate will now increase to 10.25%.
Commenting on the surprise decision, Dr Andrew Golding, chief executive of the Pam Golding Property group, said it was "a tough call", and a disappointing decision at this juncture of the year.
"With October’s inflation of 5.1% in line with expectations - slightly higher than September’s 4.9% yet still within the 3-6% target range - and with some relief in the fuel price expected in December, coupled with a stronger rand and against the backdrop of a tepid economy, it would have made sense to hold the repo rate stable, at least for now," he said.
He said the current recovery in the rand, coupled with the recent slump in the oil price, suggested that the local inflation outlook had improved somewhat, potentially easing pressure on the bank to begin hiking interest rates in the near-term.
"A pause in the repo rate cycle would have helped stimulate economic confidence and provided some relief to consumers – particularly at a time of year when many are looking ahead to the holidays and planning for the year ahead as well as any home relocations due to a change in career or lifestyle," he said.
"Clearly there are still inflation risks which may incline the Monetary Policy Committee towards continuing on a modest hiking cycle in the New Year, particularly as the rand remains vulnerable to shifting investor sentiment and monetary policy tightening in the developed world. It would thus be wise for home buyers – particularly first-time purchasers – to factor this in along with the other costs associated with acquiring residential property," he said.
On a positive note, he said the property group continued to see pockets of robust and also renewed activity in the housing market. "The case for home ownership and investment remains as compelling as ever, particularly in the current buyers’ market, as people need a place to call home, whether as an investment or primary residence." he said.The Independent on Saturday