Fixing bond rates could make life easier for struggling bond payers

ABSA Bank’s decision to offer bondholders a fixed 14% rate for five years could provide the peace of mind that the nervous or poorly resourced property investor is looking for, said Bill Rawson, Chairman of Rawson Properties – it could also, he said, open the door to negotiations with other banks to offer similar long term agreements on better rates.

Discussing this matter, Rawson said that as the recession has hit the consumer hard, overspending in the foreseeable future is unlikely – and will, in any case, be limited by the banks and by the National Credit Act.

“It is,” said Rawson, “by no means a forgone conclusion that the difficult conditions will ease off by the year end that the inflation rate will rise fast, causing interest rates to increase – nevertheless, there could still be value in fixing your bond rate for three to five years.”

It looks, said Rawson, as if those who sign on for two years will be able to fix their rates at 12% and those signing on for three years at 13%.”

Although cynics might see the banks’ fixed interest rate policies as just another way to increase their profits, this can be taken as indicative of a new willingness to make life easier for the struggling bond payer.

“They seem to have recognised that repossessing properties creates a lose-lose situation for both themselves and their bondholders and that, therefore, it will pay to find other remedies to their problems,” said Rawson.

Standard Bank had recently revealed that they now have only 38 000 repossessed homes and countrywide only some 100 000 people have applied for debt counselling. These figures, he said, are relatively small in relation to SA’s total housing stock – and are further evidence not only that the banks are now more willing to find alternative solutions but also that bondholders increasingly see themselves being able to cope.

“All this points to revival in the housing sector, which, in turn, means that our buy-now message remains as valid as ever,” said Rawson.

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