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Don’t let your fear of interest rate hikes stop you from buying

Posted on November 23 2017

One of the factors which first-time and inexperienced buyers are most afraid of is that months or years down the line the South African Reserve Bank may decide to raise interest rates

“This ‘buy now’ mantra of the property profession is not always valid, but with interest rates at 10.25% and unlikely to go higher for several years to come, now is genuinely a very good time to buy,” says Alexander.

Rowan Alexander, Director of Alexander Swart Property, says years of experience with first-time and inexperienced home buyers has shown him this.

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 homeowners to lose their homes.

“However, in today’s scenario it is perfectly feasible to reassure buyers that the chances of this happening are minimal. Big interest rises, I believe, are a thing of the past,” says Alexander.

“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.”

He says the one factor which could alter this scenario will not be overspending by South Africans, most of whom have learned to cut back severely on non-essential buying in every sphere, 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.

“Price rises are inevitable because industries claim that they 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,” says Alexander.

He says home buyers, 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 at 10.25% and unlikely to go higher for several years to come, now is genuinely a very good time to buy,” says Alexander.

Source:
https://www.property24.com/articles/dont-let-your-fear-of-interest-rate-hikes-stop-you-from-buying/26717