Thursday’s interest rate hike at a time when the economy is already weak will continue to dampen confidence in the property market and sustain its gradual correction, says FNB economist John Loos.
The Reserve Bank’s Monetary Policy Committee (MPC) hiked the repo rate by 25 basis points to 6.75% (from 6,50%), increasing the base home loan rate to 10.25% (from 10%).
And, given that it comes into effect on Black Friday, and weeks before the Christmas season, when retailers hoped to boost ailing sales, the announcement comes as a slap in the face to consumers ready to spend and beckons a bleak period for retailers.
Already hard hit by rising fuel costs and a weakening economy, the hike means consumers will have to dig deep to not only fork out more for increased monthly home loan repayments but also higher monthly repayments on every other form of debt, including car finance, credit cards, store accounts and personal loans.
Rudi Botha, chief executive of BetterBond says for homeowners with bonds, the interest rate increases will add at least R16.60 per R100 000 borrowed to their monthly repayment.
“So on a 20-year loan of R1m, for example, the monthly instalment will rise by at least R166 and possibly more, depending on the current interest rate that the borrower is paying.”