Warning to buyers to control expenditure
The steady, albeit slow, recovery of the South African residential property market is largely due to the banks beginning to ease up on their loan-to-value criteria, says Lanice Steward, MD of Anne Porter Knight Frank, one of the faster growing Cape estate agencies.
To our surprise and pleasure, said Steward, we are at last finding that some bond applicants are qualifying for 100% bonds. This is a big change from a year ago when 25 to 30% deposits were the norm.
The danger for some now (and especially those on 100% bonds), says Steward, is that they will take out bonds on which the monthly payments could become difficult if the interest rates begin to rise.
Supposing you have a 100% 20 year bond for R1,5 million. At the moment you will probably pay R14 475 per month on it. If the rates rise one percent (to 11%) this payment will grow to R15 480, i.e. by R1 000. If they rise a further 1% (to 12%) you will have to pay R16 555 per month another R1 000 increase.
Bondholders who have stretched their resources to pay right now, could find such increases debilitating.
Anyone likely to face these difficulties, said Steward, should resist with determination every inducement from the slick, skilled marketers of credit facilities whether these be for white goods, furniture, holidays or credit cards.
One of the results of the tightening of credit restrictions, said Steward, is that the big financiers have learned to identify the conscientious, good payers and to target them for a whole range of services and products.
The secret of success is, however to reject these offers and keep focussed on the home purchase.
A few years down the line, the monthly payments will not seem so onerous and it is then that alternative spending avenues might be considered not now while we are still in difficult economic times.
Article from: www.anneporter.co.za