Given the vulnerability of South Africa’s economy in the wake of last week’s unrest, Dr Andrew Golding, chief executive of the Pam Golding Property Group, anticipated the Monetary Policy Committee to adopt an accommodative approach by deciding to keep the repo rate steady, which leaves the prime rate at 7%.
“That said, a reduction in the repo rate would have provided some relief to individuals and businesses not only impacted by the effects of the lockdown and recent events, but also the increases in fuel and electricity costs and other utility tariffs” he says.
“Against a backdrop of a weaker rand and upside risks to inflation, it is widely anticipated that the next move in interest rates will be a hike. While some analysts believe interest rates will begin to rise later this year, the consensus view is that the current economic headwinds will delay the first hike until early-2022”.
Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, also believes that this was a prudent decision, as many have entered the property market owing to record-low interest rates. Subsequently, increasing rates at this meeting could have had some concerning consequences for homeowners who are already being pinched by the political unrest and harsher lockdown restrictions during the third wave.
“Those who entered the market within the last year will have become accustomed to having their bond repayments subject to the current interest rate. Many might not have room in their budgets under the current circumstances to afford an increase at this time. Though a cut of 25 basis points could have helped ease the economic burden many will face in the months ahead, the MPC has acted wisely by at least keeping interest rates steady at this time,” he explains.
“For the sixth consecutive time, SARB has announced no change to the repo rate, maintaining its multi-decade low of 3.5%. This comes on the back of stronger-than-expected economic growth in the first quarter of 2021, but disappointing recovery in industrial sectors due to ongoing electricity supply issues and recent riot activity” comments Tony Clarke, MD of the Rawson Property Group.
“As long as the economy remains under this level of pressure, it makes sense for the SARB to support investment through accommodative interest rates. It is possible that inflation could trigger an interest rate increase soon, but realistically, I do not see this happening before the middle of next year.”