South Africans’ hopes crushed as MPC hold repo rate steady

It’s been a tough year for homeowners with the prime lending rate holding steady at 15-year highs, so there’s a definite sense that the MPC’s decision to keep the prime lending rate at 11.75% was a missed opportunity to bring some much-needed relief.

Amid the positive outcome of the recent elections and the Rand’s strong performance against the dollar, there was an expectation that the Reserve Bank would relax its restrictive monetary policy.

Instead, homeowners will have to wait a little while longer for the new government’s economic growth efforts to be realised, and for the inflation rate to peak, before interest rates start to drop. 

Although rates have remained elevated for more than a year, and at levels above what was seen after the global financial crisis of 2008, the property market has a proven track record of being able to bounce back during challenging times. A most recent example being the pandemic where contrary to expectations of a market crash, activity rebounded. There are already similar indications that the market is starting to turn.

Despite the financial pressure that sustained high rates have placed on homeowners and consumers, the affordable housing segment has shown encouraging activity we expect this to trickle through to other price bands as the likelihood of a rate increase in September intensifies. 

While high interest rates make affordability a concern, especially for first-time buyers, there are ways to still make homeownership a reality inspite of the economic challenges. Buying below the R1.1m transfer threshold, or in a new development, for example, can make buying a home more accessible.

Consumers have had a few kernels of good news in recent months. Two fuel price drops have provided a measure of financial relief. FNB reports that with the lower price increases and the possibility of an interest rate cut at the next MPC meeting, buying activity is likely to bottom out. Aspirant buyers who can apply for a bond could make the most of a slower market and lower prices. As interest rates drop, the demand for properties will increase driving up house prices.

In the meantime, homeowners are urged to maintain their bond repayments and to budget prudently.

Writer: Aithne Molotsane