The decision to hike the repo rate increase by 75 basis points – the second hike of this size since November last year – will mean consumers will need to tighten their belts even further as the cost of living increases. But the broader context is worth bearing in mind: SA monetary policy is in line with major economies globally that have all been hiking – European Central Bank (0.75% on 8 Sept), US Fed (0.75% yesterday) and Bank of England (0.5% today). So, SA is not alone. And we know we must keep inflation in hand, so it is worth having one eye on the bigger picture.
With careful planning and prudent budgeting, it is still possible to invest in a home. The current prime lending repo rate at 9.75% is lower than the double digits it was in 2019. It’s probably realistic to expect a period now where we will see lower transaction volumes and dipping house prices. We also anticipate a bit of a segmentation in the market, between the lower end which is dependent upon housing finance, and the upper end where housing equity and wealth play a greater role.
The repo rate increase reminds consumers to consider affordability when making financial decisions. Work with a bond originator who can apply to more than one bank on your behalf for the most competitive interest rate and know what you can afford each month, based on your monthly household expenses. This will also help mitigate the effect of the interest repo rate increase.
Interest rates must fluctuate in response to inflationary pressures – they can’t remain at record-low levels indefinitely. However, the value of owning a property that appreciates over time remains unchanged.
