Advice and Opinion

A good start to the year for SA’s debt-laden consumers says BetterLife

Shaun Rademeyer, CEO of Betterbond.
Shaun Rademeyer, CEO of Betterbond.

The Monetary Policy Committee’s (MPC) decision this week to keep the repo rate at 7% and the prime lending rate and variable mortgage rate at 10,5% as announced by Reserve Bank Governor Lesetja Kganyago, was widely expected even though the inflation rate is currently well beyond the target ceiling at 6,8%.

Shaun Rademeyer, CEO of BetterLife Home Loans says the main factors in favour of keeping interest rates unchanged were the relative strength of the rand against the dollar and other major currencies in the past few months, and the likely moderation in food prices over the next few months now that the drought has broken.

“In addition, the MPC would obviously like to see the economy start to grow faster than it did last year, and a rate rise would have worked against that. Business and consumer confidence have declined in recent months and retail spending and credit extension were at lower-than-expected levels in the fourth quarter of last year.

“On the other hand, though, SA does urgently need to attract more investment, and if the US economy starts to grow now as a result of President Trump’s new policies and the Federal Reserve starts to raise rates, the Reserve Bank may have to follow suit to remain competitive.”

“As things stand now, though, the status quo will please SA consumers, many of whom have high levels of interest-bearing debt and have already had to contend with a steep fuel price increase this month. They are also almost certainly going to have to pay more tax after the Budget next month”, he says.

“The MPC decision will also be appreciated by those planning to buy a new home in the near future, as it will make it easier to qualify for a home loan – and easier to save a substantial deposit.”

Rademeyer says that BetterLife’s latest statistics show that housing demand in SA has remained surprisingly robust over the past two years, with thousands of first-time buyers continuing to enter the market, even if they must moderate their expectations and buy less-expensive properties than they initially intended to buy.

“A total of 34 000 families were able to buy a new home last year with our help, and more than a third of those buyers were newcomers to the market. What is more, while the home loans formally granted through BetterLife last year were worth a total of R28,7bn, home buyers also invested almost R9bn of deposits in their own homes”.

“That’s a really big vote of confidence in SA’s real estate market going forward – and barring any major global economic shock this year, we expect real estate sales and prices to show steady if slow gains this year.”

However, he says, high and still-rising unemployment levels are an increasing concern for lenders, who are currently evaluating home loan applications with great caution.

“Consequently, we would strongly suggest that prospective home buyers first seek assistance from a reputable originator such as BetterLife Home Loans to get home loan pre-approval so they know what they can afford and will be in a better position to negotiate price with sellers”.

“Their chances of being approved for a home loan will also more than double if they apply through BetterLife Home Loans. Currently, those who apply on their own only have a 34% chance of success, while we are still able to secure approvals for 72% of all applications that we submit by preparing and motivating them correctly.”