Should homeowners expect another interest rate increase?

Homeowners should not get their hopes up too high, but a reprieve could be on the horizon. Picture: Karolina Grabowska/Pexels

Homeowners should not get their hopes up too high, but a reprieve could be on the horizon. Picture: Karolina Grabowska/Pexels

Published Apr 6, 2023


Last week’s interest rate hike was higher than expected, leaving many homeowners wondering whether they should brace for another increase next month, or look forward to rates stabilising.

It is a question economists and property professionals are also pondering.

But as was seen last month, even expert predictions can be inaccurate.

Unfortunately, predicting rate changes can be tricky as the decision is dependent on external factors outside of the South African Reserve Bank’s control, explains Rhys Dyer, chief executive of ooba Home Loans.

“There’s been much speculation by economists and industry experts around the peak of the interest rate cycle. However, various uncontrollable macroeconomic factors make it difficult to predict.

“Load shedding has undoubtedly had a compounding effect on economic activity, and the supply of goods, and this is evident in the recent GDP dip of 1.3% in Q4 2022.”

He does believe, however, that there is a “strong promise” of the stabilisation of interest rates in the near future as inflation starts to settle.

“On balance, we think this will be the peak of the current interest rate cycle, with the marked weakening in the economy during the final quarter of 2022 and into early 2023 – due largely to the persistent power crisis –likely to limit the Reserve Bank’s appetite for further interest rate hikes, provided that inflation expectations moderate”.

Tony Clarke, managing director of the Rawson Property Group, says opinions “definitely seem to be trending towards interest rates remaining where they are for some time to come”.

“Some analysts are even predicting the beginning of a downward cycle as early as late-2023.”

While this would bring much-needed relief to existing homeowners, and a valuable boost to property market confidence and buyer activity, he notes that the road ahead for property is not without its challenges.

“South Africa’s economic woes are weighing heavily on the property market. People are struggling to make ends meet, let alone save for big investments like property purchases. This, together with the rising costs of property finance, has steadily eroded the pool of qualified buyers.”

Although also stating the interest rate outlook is difficult to predict at present, Andrew Golding, chief executive of the Pam Golding Property group, hopes that we have reached the peak of the current cycle, with the weakening in the economy likely to limit the Reserve Bank’s appetite for further interest rate hikes, at least for a while.

“This would then allow the full effects of the interest rate hikes already implemented to take effect.”

However, some analysts feel there may be yet another interest rate hike before it stabilises, he adds.

Provided there are no more surprises within global markets and the country;s energy crisis does not worsen, Adrian Goslett, chief executive of RE/MAX of Southern Africa, believes it is possible for this to be “the last interest rate hike we’ll see for the next while”.

“It all depends whether the Monetary Policy Committee decides that the risks to inflation are under control.”

Following the “shocking” interest rate increase, High Street Auctions director Greg Dart says the private sector is not blind to the fact that the Reserve Bank has a duty of care to keep a cap on inflation, “but perhaps it needs a plan B because the current plan clearly isn’t working”.

“We all knew another rate hike would come before the end of this quarter, but the MPC should have followed the US Central Bank’s example last week and kept the increase to 0.25%.”

He believes the property market is likely to cool after the hike.

“The MPC’s unpredictability isn’t good for investor confidence.”