By Sandile Gumede
DOWN in the South of Johannesburg at a place called Savanna City, Thabo Horings is among scores of South Africans who have been hardest hit by inflation. Horings owns a three-bedroom house with a kitchen and a lounge – best suited for his family.
The 31-year-old says that he bought the house as a way of investment, but more importantly he was tired of paying rent, and buying was a plausible solution, and to fulfil his childhood dream of having a place called home. This would ease the stress of a landlord knocking on their door every month, demanding rent.
“Growing up I longed for a stable residence; my parents never experienced that stability as we lived in a rented apartment (in a block of flats) throughout my upbringing and it was not an ideal environment,” Horings said.
Horings said that he opted for a house that he could afford – based on his income and expenses – and this seemed to have worked in the past three years. But something drastic has happened this year, which has made it difficult to pay his bond and other expenses.
“I am having a tough time because my expenses have gone up. It is not just my house and car payments but also the cost of food and petrol. This has made it hard for me to pay my bills on time,” he said.
In January 2023, Horings was paying a home loan of R5200 which skyrocketed to R7300 in September – a whopping 40% increase on repayments.
Notwithstanding these challenges, he says he does not regret his decision on this form of investment. Horings advises that people wait for the right moment as this was not opportune owing to the interest rates.
“Now is not the best time to buy. Wait for the right time as owning a house costs a lot of money. There are many things you need to budget for every month, like insurance, taxes, water and electricity and municipal rates,” he said.
Despite the annual consumer inflation slumping to 4,7% in July from 5,4% in June consumers still feel the pinch. This is the lowest reading since July 2021, when the rate was 4,6%. Consumer prices increased on average by 0,9% between June 2023 and July 2023.
Head of Product at FNB Home and Structured Lending Solutions, Angela Glover says they are pleased that the Monetary Policy Committee (MPC) kept the rates unchanged in September to give consumers some breathing room as they have been bearing the brunt of a struggling economy. She says this will allow consumers to honour their credit agreements with various financial institutions.
“We are pleased to note that rates remained unchanged in September, relieving our customers of any extra pressure on their credit agreements,” Glover said.
“As interest rates increase and customers need to pay more for their credit, it will result in some strain on their cash flows,” she said.
She said that as FNB they have recourse for their clients so that they could be able to continue servicing their debts, including loan extensions to ease pressure.
“To help with this we have numerous solutions available, including loan term extensions, rescheduling, special payment arrangements and other bespoke offerings which can be tailored to individual circumstances,” Glover said.
She conceded that the volatile economy has seen a decline in the number of applications of home loans, however they were positive that this would change as soon as the economy stabilises.
“Experience has shown that the property market is cyclical, and we look forward to a return of higher application volumes as inflation eases and interest rates reduce in future,” Glover said.
According to the Standard Bank’s Head of Macroeconomic and FIC, Elna Moolman, the SARB’s Quarterly Projection Model (QPM) indicates that repo rate is likely to fall by 0,68% point in 2024 and 0,94 percentage point by end of 2025.
Moolman said she was hopeful of rate cuts although she was cognisant of the possibility of a meagre rate cutting cycle.
“We still see rate cuts from 1H24 as feasible, though we are increasingly alert to the possibility of a later/or shallower rate cutting cycle,” she said, in a September statement.
“Firstly, by the March 2024 MPC meeting, a general rate cutting cycle should be underway globally, and secondly, following a hump that we foresee in inflation from September 2023 to early 2024, we expect a sustained retreat in inflation from March 2024.”
This might seem far, but it is news that Horings and many other homeowners are longing for so that they can have a breather.
“I don’t believe it, but I truly would like to see it go down so that I can fix my monthly repayments. I guess I will be able to have some change left, and I will be able to pay off my outstanding debts and probably save some money for myself,” Horings said.
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