(1888PressRelease)
June 29, 2009 - This translates into a cumulative monthly saving of R912 on a R500 000 mortgage loan since December,” says Luthando Vutula, Managing Executive of Absa Home Loans.
Vutula’s comments come after the key monetary policy interest rate - the repo rate - was cut by one percentage point to 9,5%. As a result, commercial banks cut their lending rates to the public, i.e. prime and mortgage rates, by the same magnitude to 13,0%. Since December last year, interest rates have been cut by a cumulative 2,5 percentage points.
Vutula says the latest interest rate cut will bring further much-needed relief to a financially struggling household sector that had to battle with a range of influencing factors during the course of last year. These include rising inflation and interest rates, a sharp slowdown in the growth of real household disposable income, the impact of the National Credit Act, and the tightening of lending credit criteria by banks, all of which affected the affordability of housing.
The latest developments with regard to inflation, as well as global and domestic economic conditions are seen as the main reasons for the further lowering of interest rates.
However, despite declining interest rates, Vutula is still of the opinion that many households may continue to experience some financial strain this year as a result of a slowing economy, which may have further employment implications, impacting negatively on income levels and eventually the housing market.
In view of these expectations, Vutula again encourages consumers to live within their financial means by keeping to a budget of income and expenses, differentiating between essentials and luxuries, limiting any further debt, paying cash for purchases wherever possible, and having specific saving goals.
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