Repo rate holds steady - reminding buyers to make the most of the lending rate

The Monetary Policy Committee's decision to hold the repo rate steady yet again, at 3.5%, should be seen as a reminder from the South African Reserve Bank to make the most of the favourable lending rate while it is in single digits.

Fortunately, the South African Reserve Bank's forecast is that the repo rate will only start to climb towards the end of 2021. 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."

The five consecutive rate cuts that have seen the prime lending rate drop from 10% in January to the current low of 7%, has already resulted in the unexpected rebound of the property market. Instead of house price freefall and stagnant sales activity many expected in response to the pandemic, prices have strengthened - especially at the lower end of the market where demand is strong - and bond applications have exceeded pre-lockdown levels. "Most encouraging is that over 70% of BetterBond's applications are from first-home buyers, which bodes well for the sustained recovery of the housing market," adds Coetzee.

Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, is confident that interest rates will remain low for most of next year. "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 rate (in conjunction with other factors) have created a housing market boom, particularly within the first-time buyers' market," he explains.

Goslett agrees that the property market made a remarkable recovery in recent months. "Our reported sales figures year-to-date for October are 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% year-on-year." Coetzee says the amount required as a deposit on a bond has dropped across all price bands, with the average deposit for homes of between R1 million and R1.5 million coming down by 24% year on year in October. For bonds of between R500 000 and R 1 million, usually for first-home buyers, the average deposit required has dipped by almost 17%.

Coetzee adds: "Many attributed the initial uptick in bond applications and sales activity to pent-up demand, but the protracted recovery of the market suggests that the historically low interest rates have certainly been the predominant stimulus." He concludes: "With interest rates likely to remain in the single digits until the end of 2022, we encourage buyers to make the most of this conducive lending period by investing in property."