Further drop in interest rate likely before the year end. Conditions are improving for home buyers.
Category News
The recent 1% reduction in interest rate, now confirmed by the SA Reserve Bank's Monetary Policy, is likely to be followed by further reductions of 0, 5% before the end of the year and could bring about a 1,5% drop in total before 2021. This means that the banks' prime rate could drop as low as 8,25%. Furthermore, says Rowan Alexander, Director of Alexander Swart Property, many home mortgage applicants are already achieving loans at 1% below the prime rate and will continue to do so.
"Although times are undoubtedly very tough with the economic life of the country crippled by the Caronavirus outbreak, we are now entering a phase in which it will be easier to finance the purchase of a home, particularly if you are a First Time Home Buyer or buying in the lower price categories. The government, although unable to offer the large-scale wage, unemployment- and business subsidies now being made available by more affluent countries, notably the USA, has declared its intention to ease the financial pressure caused by the recession as much as it can. These lower bank interest rates are significant and should be made use of. On for example, a R1, 5 million bond, the borrower could be paying about R1, 500 less per month by the end of 2020, than he was paying earlier in the year. A wide range of credit card and HP debt will also be reduced, which should make life less difficult for those who manage to hold onto their jobs."
Asked to predict when the current crisis could show signs of easing, Alexander said the difficulties of isolating individuals living in high density townships and informal settlements, and getting them to apply for virus testing, pose huge challenges for SA should the Coronavirus escalate here, of which there are already indications that it will.
"We are therefore, possibly looking at a scenario where we should not expect a turn around to become evident in under twelve months but," he repeated, "these conditions make it much easier to secure a loan and to buy a home or an investment property at a time when others are holding back or unable to afford any purchases other than those absolutely essential for survival. As in previous hard times, those who move in now will be very grateful in 18 months that they did so."
For further information or comment contact Rowan Alexander on 082 581 3116 or by email : rowan@asproperty.co.za
Author: Rowan Alexander
