Residential market impacted by interest rates

Posted On Monday, 08 March 2004 02:00 Published by
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The Reserve Bank's decision not to lower interest rates further indicates a contained approach that will temper the property market
The Reserve Bank's decision not to lower interest rates further indicates a contained approach that will temper the property market, which has been experiencing boom conditions.

Saul Geffen, MD of MortgageSA, says the decision - announced after the bank's Monetary Policy Board meeting yesterday (Thursday, 26 February) - indicates a turning point in the recent interest rate trend and that consumers can expect home loan rates to increase in degrees from now on.

He says it is advisable for homeowners to "stress test" their budgets to check that they have not overextended themselves financially as a result of the low interest rates, and to ensure that they will be in a position to meet their bond payments when interest start to rise again.

He cautions that a relatively small rate increase can add a substantial amount to a homeowner's monthly repayments, and this could result in the borrower's home becoming unaffordable.

Having potentially reached the bottom of the interest rate cycle re-opens the debate on whether or not to fix rates.

While this is a delicate decision based on personal factors. Geffen advises that homebuyers should not panic, as rates are expected to rise slowly and in any event are not expected to soar to the levels of the early nineties in the short term.

Publisher: Sunday Tribune
Source: Sunday Tribune

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