Rate cut brings debt relief for homeowners

JOHANNESBURG - The cut in the repo rate on Thursday will provide debt relief for homeowners and consumers, the Pam Golding Property group said in a statement.

Earlier, the Monetary Policy Committee of the SA Reserve Bank trimmed the repo rate by 100 basis points to 7.5 percent.

However, CE Andrew Golding noted that the handbrake on the residential property market was still up, “with the lag effect normally experienced before interest rate relief takes effect most likely to be extended”.

He said of all normally ‘mortgage-able’ deals in a pre-recession environment, only 50 percent of these were actually being approved as the lending institutions continued with their stringent lending criteria.

“At present, all indications are that we are unlikely to see change for at least another six months from now, which is mostly due to the unusual finance environment and compounded by general negative recessionary sentiment globally.”

Herschel Jawitz Properties also welcomed the latest rate cut.

“Given the latest economic data, and despite the disappointing inflation figures, the Reserve Bank is clearly taking a longer-term view of the economy and inflation,” it said in a statement.

With regard to the impact on the residential property market, Jawitz said the latest cut would continue to take pressure off existing homeowners in terms of their monthly repayments.

“This is important as it will continue to slow down the number of repossessed properties and distressed sellers on the market, which obviously impacts on property prices.”

According to Jawitz, it would still take some time for buyers to “really climb back into the market” due to high levels of indebtedness and job concerns, “but every rate cut helps get people back on track, as their overall debt repayments come down”.

With interest rates reductions and property prices still soft, buying was becoming more and more attractive from an affordability point of view.

“Unfortunately with the banks’ lending criteria it is still difficult for buyers to take advantage of the opportunities, but that will also change,” Jawitz said.

- Sapa

Article from: www.citizen.co.za