BRACE FOR EVEN HIGHER REPAYMENTS ON YOUR HOME LOAN

Debt holders face higher repayments following the latest announcement by the Monetary Policy Committee (MPC). The repo rate climbs by another 75 basis points to 5.5%, leaving the prime lending rate at 9%.

Unsurprised by this announcement, Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett says that he is interested to see whether this latest hike will affect activity within the local housing market. “In the first quarter of the year, we already noticed activity subside following the first interest rate hike that was announced in November 2021. However, housing market activity inexplicably bounced back in Q2 and is now even stronger than it was last year,” he explains.

“While I do expect that buyer activity will take a knock following this latest hike, I am also optimistic that demand for real estate will remain strong. Interest rates are still roughly 1% lower than pre-pandemic levels and the housing market was still active when the prime was at around 10% pre-COVID. Even after this latest interest rate hike, it is still more affordable to take out a home loan now than it was back in 2020, which leads me to believe that the property market will remain active despite the increasing interest rates,” says Goslett.

His advice to buyers over this time is to make use of the various online affordability calculators to work out what the repayments will be at higher interest rates before going ahead with a purchase. He also recommends that real estate agents start building up some cash reserves for if and when the real estate market does become less active.

“It is difficult to say what lies ahead for the local housing market. My advice is to prepare for the worst and to expect the best. For buyers and tenants, this means leaving room in the budget for future interest rate hikes. For sellers and landlords, this means setting a fair asking price and rental amount so that buyers and tenants are able to afford the purchase and the rent. For agents, this means building up savings to get you through quiet months with no sales. It is always better to be well prepared and not need it than to be unprepared when disaster strikes,” he concludes.