The latest interest rate hike announcement of 25 basis points pins South Africa’s repo rate at 7.25%.
While the rate hike is lower than the three consecutive 75 basis point increases experienced in the latter half of 2022, the consumers are feeling mounting pressures of increasing costs, ongoing loadshedding and slow economic growth.
But Rhys Dyer, CEO for ooba Home Loans, believes that Thursday’s moderate increase is one of the last rate hikes South Africa will experience in 2023.
“Inflationary pressures are now subsiding, and South Africa appears to be very close to, if not at, the peak of the current interest rate cycle. Interest rates have reached similar levels to those experienced pre-pandemic – now at 10.75% versus 10.25% in the first half of 2019,” said Dyer.
Internationally, a source of good news is the reversal of China’s zero-Covid-19 policy. The reopening of the Chinese economy should provide a much-needed boost to the global economy and local commodity prices.
Local housing market
ooba’s latest statistics depict a gutsy stance from major banks, which continue to compete for home loan business, with rates below prime at levels last experienced more than 10 years ago.
“In addition, the rate of successful home loan approvals remains robust, currently sitting at 84.1% in quarter four of 2022, up from the approval rate of 83.7% recorded in quarter four of 2021.”
Further good news exists in the form of the average national purchase price, which grew by only 2.4% in quarter four of 2022.
“Homes are becoming increasingly affordable for aspirant homebuyers, especially in the first-time homebuyer’s segment, where average purchase prices are lower compared to year-earlier levels, which means homebuyers are finding more value for their money.”
Curbing effects of rate hikes
“In addition, we are seeing signs of greater liquidity among financially savvy consumers, as they continue to prioritise deposits on their homes to meet affordability requirements and achieve a better interest rate.
“Our latest statistics show a 22.8% increase in the national average deposit amount from R97 723 in quarter four of 2021 to R121 906 in quarter four of 2022,” he said.
While first-time homebuying appetite remains off its highs due to rate sensitivity, this category has also indicated an increased prioritisation of deposits, with the average amount rising by 14.3% (now at R98 038) from quarter four of 2021 to quarter four of 2022, indicating smart budgeting among this category.
Looking ahead, Dyer believes that current and potential homeowners can start to breathe a small sigh of relief, as South Africa’s interest rates stabilise.
“With the exception of a possible single small additional rate hike this year, I believe that we are now out of the woods, and that South Africans can start to plan around the interest rate of 10.75 – 11%.
“We also believe that this stabilisation will allow more buyers to better budget their monthly repayments, knowing that we are at the peak of the interest rate cycle, with future rate movements likely to be downwards early in 2024.”
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