How are Interest Rates affecting home -buying?

How are interest Rates affecting home buying?  
                                                                                     by Adebah Constant
                                                                                                                      
                                                                                                                                                        
                                                                                                                   



The South African Reserve Bank [SARB]

is the central bank of South Africa. The primary purpose of the Bank is to achieve and maintain price stability in the interest of balanced and sustainable economic growth. Together with other institutions, it also plays a pivotal role in ensuring financial stability.’ MPC [Monetary Policy Committee]-

The SARB’s Monetary Policy Committee (MPC) conducts monetary policy within a flexible inflation-targeting framework. The MPC consists of up to seven members from the SARB: the Governor, the three deputy governors and selected senior officials appointed by the Governor. The Governor chairs the MPC meetings.

Repo rate – The rate set by the reserve bank’s MPC [Monetary Policy committee]. This is the rate at which the Reserve bank lends money to the commercial banks

Prime interest rate – The basic rate of interest which banks charge their clients when lending them money [Google]

Interest rate – the rate at which a bank charges a borrower when granting them a loan.

Prime lending rate – For the consumer- the cost of borrowing money from the banks


When buying a house, the qualified buyer can be granted a Home Loan at an interest rate that is calculated based on various factors such as income bracket, purchase price of the property, location of the property etc.
So, when the SARB decides to change the repo rate, this directly affects the prime interest rate/ interest rate.

When the repo rate increases, the prime lending rate/ interest rate increases.
This is a major contributing factor that makes buying a home more expensive and reduces the number of qualifying buyers in the market. Thus, buyer demand is reduced, causing the property prices to decline.



Repo Rate ↑↑           Interest Rate ↑↑            Market demand ↓↓            House Prices ↓↓



When the repo rate is cut, and consequently the Interest rate is cut, market demand improves due to improved affordability, demand increases, and house prices increase.



Repo Rate ↓↓            Interest Rate↓↓          Market demand↑↑        House Prices ↑↑


We trust this explains the interest rate.

Let me help you get a good rate for your home loan.

Visit our website