Rates are rising but optimism doesn’t have to drop

In line with economists’ and industry experts’ recent forecasts, today’s second interest-rate decision of the year by the SA Reserve Bank Monetary Policy Committee, has seen the prime interest rate rise by 0.25% to 7.75%.

Jors van Niekerk, CEO of MortgageMax, says the decision was not unexpected and it is important to maintain perspective. ‘Clearly, there is a lot going on in the world – we are not ignoring the global backdrop – but it is also worth balancing our worldview and reminding ourselves that we still have a lot to be thankful for, especially in the mortgage origination space in South Africa.’

While it is true that consumers are facing rising fuel and living costs, exacerbated by the Russia-Ukraine conflict in Eastern Europe, interest rates are still well below pre-pandemic levels, when the prime lending rate was in double digits (10% in January 2020). And in uncertain times, property has proven itself to be a safe-haven asset that has a great deal to offer in terms of long-term financial planning and securing a future for one’s loved ones.

South Africa is in the fortunate position of having seen its property market strengthen over the past two years, with a homebuying boom brought on by sustained low interest rates that dropped to historic lows during the pandemic. As a result, resilience built up in our housing market and it remains robust. ‘This gives us a much stronger foundation from which to face any challenges that might be headed our way, than would otherwise have been the case,’ says Van Niekerk.

In terms of homebuying, another heartening factor is the sustained positivity in the lending environment, and the ongoing assistance from our banking partners, for consumers to make their dreams of homeownership come true. Lenders are rightly looking more closely at affordability in the context of rising interest rates, but MortgageMax continues to see strong competition in the origination space between the banks in terms of offering homebuyers the best-value deals on their home loans.

Another supportive factor for buyers in the lower price brackets, up to R1 million, is continued strong numbers when it comes to home loans in excess of 100% being granted by the banks. With many first-time buyers purchasing in this price range, the benefits of getting a 105% or even a 110% home loan, can be significant as they make the step up from aspiring homebuyers to becoming proud homeowners. Home loans of more than 100% are geared at helping with bond and transfer costs, covering home-moving or other large expenses, or assisting buyers who have good credit records but were unable to save a deposit. ‘In many cases, these loans mean the difference between getting your foot on that property ladder now, or having to keep renting, and for a young person who is just starting out, this could be life-changing,’ Van Niekerk explains.

Looking ahead, MortgageMax will continue to keep an eye on trends in the local property market. These include pandemic-induced semigration and the work-from-home lifestyle that has changed many lives across the world. ‘These trends keep us on our toes and remind us that change really is the only constant. It’s good to embrace this and to adapt along with it, because our clients’ needs are always our top priority and improving their lives is the reason why we do what we do every day!’ Van Niekerk concludes.

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