Interest rate may help speed up recovery in housing market
The record-breaking streak of interest rates cuts in January through to May has already spiked interest in the first-time buyers’ market.
The housing market received further good news when today, the Monetary Policy Committee (MPC) announced that the interest rate will drop by 25 basis points. The repo rate therefore lowers to 3.5%, leaving the prime lending rate at 7%.
Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa applauds the MPC for this decision. “As things stand, their previous cuts have already generated increased appetite in the first-time buyers’ market. This cut will hopefully go a long way to help speed up recovery within the housing market and fuel further growth in the economy,” Goslett explains.
At the current interest rate, it is possible that one’s monthly repayments on a home loan could be less than one would expect to pay in rent for the same property.
At the current interest rate of 7%, repayments on a R1 million home loan taken over 20 years would amount to just R7,753 per month. In many suburbs, that works out to be less than one would expect to pay in rent on the same home.
For example, tenants can expect to pay roughly R8,500 on a 1-bedroom apartment in Rondebosch East. These kinds of homes usually sell for between R850,000 – R1 million, making the monthly bond repayment more affordable than rent on these properties.
“For those who can afford to do so, there really has never been a better time to enter the market than right now. I would just advise buyers to leave room in their budget for if and when the interest rates return to pre-lockdown levels,” Goslett concludes.