Growing Calls for Fixed Interest Rates

January 15 - Several elements in the South African property market are calling on the government to reintroduce fixed interest rates for residential property, especially when the loans are long term.

According to Soula Proxenos of International Housing Solutions mortgage providers "have made their credit criteria more exacting and have, until very recently, required large deposits from households that conventionally have little or no savings."

"In recent weeks," said Proxenos, "the mortgage supply appears to have loosened up a bit, but is still constrained."

Proxenos said that despite the fact that interest rates are low at present, many people are hesitant to commit to entering into long term mortgage contracts as they feel that they might not be able to sustain their monthly repayments when rates rise again.

"Fixed rates or a cap on how high interest rates can go are critical for households with less disposable income," she added. "These households are the most negatively impacted on when interest rates increase and this inevitably leads to foreclosure and bank lending being withdrawn, and in return impacts on the ability of developers to produce stock."

In the meantime, FNB reported that South African house prices climbed for the second month in December

House prices increased an annual 2.7%, according to John Loos, home loan strategist for First National Bank.

As South Africa slowly climbs out of the recession, house prices are expected to climb even higher.

1/15/2010 8:24:47 AM