PROPERTY NEWS - The Reserve Bank announced its decision to cut its repo rate by 25 basis points to 6,5% and the prime rate and home loan "base" rate from 10,25% to 10%.
This move, according to Rudi Botha, CEO of BetterBond, South Africa's biggest bond originator, will translate for existing homeowners into a saving of R151 a month on a 20-year loan of R912 000 - the current average approved bond size.
"This means that the minimum repayment amount of R8 952 on such a loan will now drop to R8 801.
"In addition, borrowers who are able to maintain payments at the current level rather than lowering them, now stand to shorten their overall loan repayment period by 12 months - and save more than R73 000 on the total cost of their home."
The interest rate cuts also mean, he says, that new borrowers will now find it easier to qualify for a loan - with the gross household income requirement for a R912 000 loan dropping from R30 000 a month to R29 000 a month.
In the first-time buyer sector, where the BetterBond statistics* show that the average approved bond size is currently R715 000, the average monthly bond repayment will drop from R7 018 to R6 899, and the monthly household income required to qualify will decrease from R24 000 to R23 000.
"This relief, coming in the wake of a significant drop in the inflation rate to 4% last month and Moody's decision to keep South Africa's investment rating out of the 'junk' zone, is bound to buoy consumer confidence, and will mitigate the effects of the VAT increase and the fuel tax," says Botha.
"In addition, Treasury recently announced that the economy is growing at a faster rate than expected, which spells an increase in employment this year. We are consequently expecting a significant increase in home sales over the next 12 to 18 months, and recovery in price growth as the current oversupply is absorbed."
*The BetterBond statistics represent 25% of all residential bonds being registered at the Deeds Office and are thus a reliable indicator of the state of South Africa's residential property market.
