Make the most of static rates and buy property before the election
The Monetary Policy Committee (MPC) of the Reserve Bank has once again decided to leave South Africa’s repo rate unchanged at 6,75% and prime interest rate the same at 10,25%.
“This is very positive news for consumers as it means no increases in home loan and car instalments or personal loan, credit card and store account repayments until at least after the General Election in May,” says Rudi Botha, CEO of SA’s leading bond originator BetterBond*.
The decision follows news this week that the consumer inflation rate is currently holding at much lower levels than in 2018 (4,1% in February) despite the recent fuel price increases, and that employment increased by 158 000 or 1,6% year-on-year between December 2017 and December 2018.
“In addition, the economy grew by 1,4% in the fourth quarter of 2018 and 0,8% in 2018, and the Bank is hoping this trend will continue, resulting in GDP growth for 2019 of 1,3%,” he notes.
“However, household expenditure is currently declining, so static interest rates are needed to support growth - and will also offset the pressure on households resulting from the further fuel price and levy increases expected this year, and the 9,4% hike in electricity tariffs which Nersa recently granted to Eskom.
“Stable rates will hopefully also encourage existing homeowners to pay more than the minimum home loan instalment every month and get their properties paid off in far less than 20 years.” (To calculate how much this could save you, see https://www.betterbond.co.za/calculators/additional-payment)
As for prospective home buyers, Botha says, now’s the time to urgently seek bond pre-approval and make a move, whether it’s to upgrade or to purchase a first home.
“The reason is that property prices are expected to start escalating more rapidly after the Elections and that this is going to make it more difficult for them to qualify for a bond.
“At the moment, however, buyers have an advantage because the banks are keen to lend to them and we are there to help them secure a bond at the lowest possible rate through our multi-lender application process.”
This is very important, he notes, because even a small rate difference can save you many thousands of Rands over the lifetime of a bond.
“Currently, the average variation between the best and worst interest rate offered on a bond application is 0,5%, and on a 20-year bond of R1,5m, for example, that translates into potential savings of more than R120 000 over the lifetime of the bond, as well as a total of about R6000 a year off the monthly bond instalments – at no cost for our service.”