Good start to the year for homebuyers as repo rate holds steady

The Monetary Policy Committee's decision today to hold the repo rate steady at 3.5% will continue to create a favourable lending environment for South Africans wanting to buy their dream home, says Carl Coetzee, CEO of BetterBond. "We welcome the MPC's decision, which will keep the prime lending rate at its record-low of 7%. Five consecutive repo rate cuts last year set the scene for the housing market's significant recovery, and now homebuyers will have a further opportunity to apply for a bond in 2021 at this competitive rate."

The South African Reserve Bank indicated at the end of last year that a gradual repo rate increase was likely towards the end of 2021. "However, it's possible that the economic impact of the second wave of the COVID-19 pandemic may result in one or two modest cuts in the repo rate during the year to provide some additional economic relief once the Rand begins to strengthen," notes Coetzee.

BetterBond experienced its best December on record, with bond application volumes increasing by 53% year-on-year. "The word has spread that the lower interest rate means that buyers can afford up to 30% more than if they had applied for a bond in January last year. For many, this improved affordability has resulted in aspirational purchases. With the premium being placed on lifestyle as so many of us are working from home, we are definitely seeing more buyers applying for bonds to secure their dream homes."

House prices remained resilient by the end of 2020, according to the latest FNB Property Barometer (December), increasing by 3.8% year-on-year, compared with the 3.5% growth seen in November. Much of this price growth was at the lower end, because of increased demand for homes and improved affordability due to the lower interest rate. But, there was also marginal improvement in activity across all price brackets. As a result, the time that properties stayed on the market once listed dropped from the almost 11 weeks reported in the first quarter of the year, to just over nine weeks.

Concludes Coetzee: "While we welcome the decision to hold the repo rate steady, there is certainly opportunity for movement, and we hope that when the MPC meets again later in the year, once the vaccine has been rolled out and inflation stabilises, a further cut will be announced to once again jumpstart economic recovery." He adds: "However, the housing market's recovery is already on track, and if our December bond application numbers are anything to go by, we are in for a bumper 2021."