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Homeowners 'should factor an interest rate hike into their budgets'

Published Sep 26, 2021


While the decision this week by the Monetary Policy Committee (MPC) of the South African Reserve Bank to keep interest rates as they are (the repo rate at 3.5% and the prime lending rate remaining at 7%), giving homeowners who are paying off bonds some extended relief, the possibility that rates will begin to rise in the near future is a distinct possibility.

Adrian Goslett, regional director and chief executive of RE/MAX of Southern Africa, says while grateful for the decision, he remains cautious for when interest rates will begin their inevitable upward climb. Earlier this year he went on record as saying that it was unlikely that we would see interest rates climb this year but still advised homeowners to leave room in their budget for a possible increase.

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“It is no secret that SARB governor Lesetja Kganyago hopes for the inflation target to be lowered to 3% over time, and at every MPC meeting thus far, interest rate hikes have been mentioned. I would caution homeowners and new buyers to take these warnings seriously and make sure there is provision within their budgets to allow for an increase of at least 25 basis points at any point in time,” Goslett says.

As things stand, keeping interest rates stable will go a long way towards helping debt holders keep up with repayments within an already struggling economy. “Unemployment rates are at an all-time high. Unless things start to change and the economy is allowed to open up further, this does not bode well for the local housing market. Rising unemployment often leads to an increase in the number of repossessed homes and an increase in the number of homeowners who are forced to downscale. In time, this will then have a negative impact on housing values,” Goslett says.

That said, the property market continues to be highly active and has performed better than expected since the pandemic hit last year. “This speaks to the reality that, no matter how badly the economy performs, people will always need a place to live. I am not sure if and when the property market will become less active and take a turn for the worse, but what I am sure of is that those who view owning a home as a long-term investment will inevitably enjoy good returns if they have made smart investment choices,” he says.