Not getting that bond? Your personal finances may be why
The interest rate is not the only element has a bearing on buyers’ potential to afford a bond. This is according to Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, who says buyers’ personal finances will play a far greater role in determining how much they will be able to repay on bond instalments.
“A rise in the interest rate will have less of an effect on the buyer’s affordability ratio than high levels of personal debt,” he says, noting that the increasing cost of living is putting many consumers under extreme pressure. “With the compounding effect of the ever-increasing cost of living, even a marginal increase in interest rates could be the proverbial ‘straw that broke the camel’s back’ for numerous consumers. Many households are already struggling to make ends meet, so further hikes will be a tough pill to swallow.”
This month marks the third Monetary Policy Committee meeting where the Reserve Bank will decide hike the prime lending rate or leave it at 10.50%. All indications point to increased rates with inflation on the rise and the continued weakening of the currency.
“Prospective home buyers and homeowners alike should draw up a budget to assist them in dealing with the challenging economic environment they find themselves in. Consumers will be in for hard times ahead if they don’t streamline their spending and build up their cash reserves.”