Fears of interest rate rises not a valid reason for holding back
Years of experience with first time and inexperienced home buyers has, says Rowan Alexander, Director of Alexander Swart Property, shown him that one of the factors of which they are most afraid is that months or years down the line the South African Reserve Bank may decide to raise interest rates. Without knowing most of the facts, he says, they believe that this could cause serious difficulties in meeting their monthly bond repayments.
The reason for these fears is that some have memories, or have heard of, the massive interest rate rises of the late 1990s and 2007/2008 which did cause many home owners to lose their homes. However in today’s scenario, says Alexander, it is perfectly feasible to reassure buyers that the chances of this happening are minimal. Big interest rises, he believes, are a thing of the past.
“For some 20 years now the overall interest rate trend has been downwards. In the present economic scene, with growth exceptionally low, junk status relegation a definite possibility and political turmoil continuing, the chances of significant economic growth are severely limited and it is only this that could cause inflation to go out of the 3% to 6% bracket -- and until that happens rates are likely to remain at their present levels for the short to medium term.”
The one factor which could alter this scenario, says Alexander, will not be over- spending by South Africans, most of whom have learned to cut back severely on non-essential buying in every way, but the steadily increasing cost of services like electricity and water and the higher production costs associated with many essential raw materials needed by industry.
“These price rises are inevitable because industries cannot operate without them. They could therefore cause inflation, but even then the resultant interest rate hikes would be small and definitely not crippling as they were in the difficult periods referred to earlier.”
Home buyers, says Alexander, should, therefore, recognise that now is the right time to buy.
“This buy-now mantra of the property profession is not always valid, but with interest rates of 10,25% and unlikely to go higher for several years to come, NOW is genuinely a very good time to buy” says Alexander.
For further information contact Rowan Alexander on cell phone number 082 581 3116 or by email rowan@asproperty.co.za.
13 Mar 2018
Author Independent Author