Stable interest rates lead to housing market boom

The Monetary Policy Committee (MPC) has again announced that interest rates will remain stable, keeping the repo rate at 3.5% and the prime lending rate at 7%.
According to Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, interest rates are likely to remain low as we head into 2021. “There is the possibility that there will be a slight increase of around 0.5 points for 2021, but this should not have a great impact on the property market. As things stand, the low interest rates [in conjunction with other factors] have created a housing market boom, particularly within the first-time buyers’ market,” he explains.
Goslett remarks that the property market as a whole has made an unexpectedly fast recovery after months of inactivity during Alert Levels 5 and 4 of the national lockdown. “As a region, our reported sales figures year-to-date for October is up by 3% from last year. This is following three months during hard lockdown (from April to June) where our sales figures dropped by as much as 62% YoY. A possible reason for the fast recovery we have seen is that many have had to adjust their living situations and lifestyles to suit the post-lockdown world. The low interest rates have also made it incredibly appealing for first time buyers to enter the market,” he elaborates.
According to Carl Coetzee, CEO of BetterBond, not only is it the ideal time to apply for a bond – as the lower interest rates have made homes 30% more affordable – it is also a good opportunity for those with the financial means to pay more into their bond to reduce their overall repayment period. As it stands Coetzee notes that the difference from 10% to 7% on a R1 million home means a monthly repayment saving of around R1 900 and a staggering R455 000 over the 20-year bond term.
For those who can afford to do so, Goslett encourages buyers to enter the property market while interest rates are at this record-breaking low. “While it is unlikely that interest rates will return to their previous levels of around 10% within the near future, I would still caution buyers to leave room in their budget for future interest rate hikes over the period of their lending term. I would also encourage them to make the most of the current market conditions before it changes into a seller’s market – which could happen within the months to come if activity continues to remain as high as it has been in the last three months,” he concludes.

 

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