IEASA National - News

Rate increase shouldn’t affect property market – regulate spending   Article Date :9 Jun 2006 Comment re announcement of a 0,5% increase. Yesterday’s announcement of a 0,5% increase in interest rates, shouldn’t have a large impact on the property market. The increased interest rate, which is now back to the April 2005 figure of 11%, should lead to more cautious consumer spending in the country. According to Bill Rawson, President of the Institute of Estate Agents, the increased interest rate won’t discourage buyers from property. “Property still remains an excellent investment with good returns – especially in the middle and lower markets. “However, the message to the public is clear: Regulate your spending habits carefully and do not over-stretch yourself when lending money from the bank to buy property or other merchandise.” This increased emphasis on responsible spending is also made very clear in the National Credit Bill. The proposed legislation will make lending institutions responsible for ensuring that buyers can in fact afford the loan that they apply for. “Potential borrowers will face a barrage of questions about their earnings, domestic budgets and others debits and commitments.” The effect of the interest rate hike on a current home loan is as follows: A property owner with a bond of R400 000 will be paying R136 more than before, and a bond worth R1 million will result in R340 more being paid towards the bond each month. For a bond of R2,5 million, the new repayment will be R850 more than before the announced increase. “The increased interest rate will result in less disposable income across the board. This will ensure that the general public invest their money in assets that will contribute to their wealth and not waste their earnings on items that loses value quickly.” CLICK HERE TO RETURN TO THE MAIN NEWS PAGE