Comments on the current upward trends in interest rates



Estate agents anxious over the current upward trends in interest rates can take heart: The prime interest rate in the current upward cycle is "most unlikely" to go above 17 percent, according to Absa homeloans GM Richard Gahagan. He told delegates to last week's annual Homenet conference that although there was a possibility of one more percentage point increase early next year, rates should then begin to decline. Next year's decline is also supported by Nedcor Investment Bank (NIB). Jack Trevena, general manager, Nedcor Bank Homefinance and Services, said in an interview at the recent Property Professional Awards in Hermanus, that NIB expected the prime lending rate to decline to 14 percent at the end of 2003 after peaking at 16 percent at the end of this year. Gahagan noted that the real estate industry as a whole had experienced a property boom over the past two years that few agents had experienced before. "Consumer confidence is at its highest level in 30 years. Banks have been reporting record home loan lending levels. "The big question though, is what will happen next to the economy in general - and everyone's crystal ball seems fuzzy." Gahagan said it was a given, though, that the government was committed to fighting inflation. "And if the inflation level threatens to become uncomfortable the Reserve Bank is going to step in and push up the repo rate." However, whether inflation continued to rise or not would depend on how quickly local suppliers responded to the rand's improved exchange rate against foreign currencies. "As it stands now, many more need to come to the party." He said interest rates should steady after this month's increase, but there might be one more increase, which would take prime and the base home loan rate to 17 percent. After that, in the second quarter of 2003, rates should start to decline again. Meanwhile, the property market should continue its strong showing even at 17 percent. "In fact, there are those who say the latest increase might benefit the market by releasing some stock as more sellers come into the market." Article: 18 June 2002 RodneyHayter The Property Professional On-line Edition 46 email: hayter@icon.co.za