Rate Cuts Welcomed by South African Property Market

September 17 - The Reserve Bank announced a 50 basis points reduction last week, bringing the interest rate down to 6%.

The South African property industry is celebrating the news and believes that the new interest rates will boost sales in the market.

It will also make it possible for more potential homebuyers to obtain home loans.

This is the lowest rate that the country has seen in over three decades.

The Chief Executive of Harcourts Africa property group, RIchard Gray said about the news: "The market recovery had started to stutter as a result of very stringent lending criteria, high household debt levels and a mindset among consumers that the recession was not over."

"This is the lowest interest rate for about three decades, and the news could not have come at a better time," he said.

According to the Managing Director of the RealNet Group, the minimum monthly payment on a 20 year home loan worth R500,000 would decrease by R164, thanks to the new rates.

"The real benefit of the Reserve Bank's decision is it will make it easier for potential homebuyers to qualify for loans," said Jan Davel. "The monthly earnings required to qualify for a R500,000 loan at 9.5% will be some R15,500, compared to the R16,100 required at the previous prime rate of 10 percent."

Analysts also expect that borrowers will be able to secure loans at below prime right if they have a good credit record.

9/17/2010 8:48:56 AM