Lending Rate & Bond Repayments

So, by now you would have heard that the prime lending rate stayed unchanged at 9% after much speculation that it might even drop with 100 basis points.

There has been no change to this since it came down from 9.5% in November 2010 and many economists predict that it will stay this way for the remainder of this year. There are many economic factors that play a role in the decision to raise or drop the interest rate but it is no secret that household debt-to-income ratios hasn’t changed a lot during the last couple of years and has stayed very high meaning that most households are under pressure to service all their debt with the income they receive.

Currently, a R 800 000 bond over 20 years at prime (9%) will cost you R 7200 per month and R 6436 over 30 years. With many home owners under financial pressure to sell this IS a good time to buy property. If you take into account that the last interest rate hike was in June 2008 when it went up to 15.5% and before that, the highest point was in Sept 2002 when it went up to 17%. The repayments on the same house over 20 years would have been R 10 831 and R 11 735 respectively ….. eish!

We are currently seeing a huge upswing in activity in Krugersdorp and Roodepoort where there is a big demand for property around and below the R 1 300 000 mark. Houses that are priced right, sell!!

The last 4 to 5 years have not been kind to speculators looking to buy low and sell high unless you bought a bargain, way under market value. Most buyers from 2008 onwards would be lucky to make a profit if they were to sell now unless they have made significant changes to the property, increasing the value but not over capitalising for the area and type of property you have.

With the interest rate being so low, banks are offering prime-plus rates to successful applicants and having a deposit will help a lot to bring your rate down ……. Happy buying!!!

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