Rates on hold. Time to buy before the election?

Taken from the Mortgage Max newsletter of 29 March 2019.

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.

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%.

However, household expenditure is currently declining, so static interest rates are needed to support growth – and will also offset the pressure on households that will arise as the result of 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.

As for prospective home buyers, 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, because property prices are expected to start escalating more rapidly after the Elections and that will make it more difficult for them to qualify for a bond.

At the moment, they have an advantage because the banks are keen to lend to home buyers 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, because even a small rate difference can save you many thousands of Rands over the lifetime of a bond.

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