SA Repo rate hike: we need to prepare for future interest rate hikes

Many have held their breath in anticipation of a slight rise in interest rates after the long period of record lows and it has happened! The South African Reserve Bank has chosen to increase the repo rate by 25 basis points. This brings the repo rate to 3.75% and the prime rate to 7.25%.

In fact, we need to prepare for future interest rate hikes. The Monetary Policy Committee has previously expressed concern about the effect that Eskom’s tariff hikes and volatile oil prices will have on inflation. If this goes too far above the midpoint of the 4.5% inflation target, the SARB was very likely to raise interest rates as a control measure.

From this point on, however, interest rate increases should at least start very slowly. We expect a slight increase again in the new year, which means owners still have some time to prepare. With the added financial pressure of rising oil prices as well as increases in electricity and water prices, careful financial planning will be key in 2022.

Economic growth forecasts for 2022 are cautious at best, with outages threatening the already weak 1.8% GDP growth forecast. However, the real estate market remains full of opportunities for buyers, sellers and homeowners, especially during the holiday season.

Less marketing competition during the holiday season

There is often a drop in listings over Christmas and New Years, which means that sellers who market during this time have much less competition. The holiday season’s focus on friends and family also presents a great opportunity for vendors to tap into the holiday spirit. Showcasing the summer side and entertainment potential of a home can work wonders this time of year.

On the buyer and investor side, house prices remain favorable, and while interest rates will not rise rapidly in the near future, they should still be good for some time, still presenting a good time. to buy. However, now is not the time to push affordability, but now is the perfect time to buy cheap and pay off your debt faster.

The same goes for homeowners, existing homeowners should focus on reducing unnecessary expenses and making paying off their obligations their financial priority. Putting extra income, like year-end bonuses, directly into your home loan can save you incredible money in the long run.

Above all, however, buyers, sellers, and homeowners should enjoy their homes this holiday season, be financially responsible, and not panic over what 2022 may bring. We may have challenges in store, but it’s nothing we’ve never faced many times. Real estate remains an excellent stable investment, outperforming many other asset classes.

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