Rate cut welcomed, vital stimulus for economy and property during this crisis, says Seeff
The decision by the Reserve Bank’s Monetary Policy Committee to cut the repo rate by 100 basis points to 5.25% (from 6.25%) reducing the mortgage rate to 8.75% (from 9.75%) is a welcome stimulus for the economy and property market, says Samuel Seeff, chairman of the Seeff Property Group.
This cut will help when the recovery starts, he says further. It takes the interest rate down to levels last seen in the 2012/3 period and is at one of the lowest levels in decades. It is in keeping with global developments given that the world economy is now in recession and potentially facing a similar situation to the 2008 Global Financial Crisis.
Central banks across the world have responded with aggressive rate cuts and the US Fed has just provided a second emergency cut bringing rates down to near-zero and launching an aggressive economic stimulus package.
Given that SA does not have the reserves to match any such stimulus and is fiscally under massive pressure, it is necessary for the Reserve Bank to come to the aid of the economy and provide assistance to South Africans. Seeff says that the Bank’s stance over the last year has been too hawkish with only two 25bps cuts despite there being ample reasons and calls for more aggressive cuts to boost the economy.
This cut will provide much needed relief for households and small businesses and aid those with debt and home loans. It will provide a vital boost for the property market. Contrary to expectation, the market has been active this year and people have continued buying, but, he says, we will need to wait and see what effect the crisis will have.
This year has seen more commitment from buyers looking to take advantage of what is the best buyer’s market in a decade while sellers who had been holding out are now showing some urgency. The rate cut will provide additional stimulus for buyers who might still be sitting on the fence to take advantage of the favourable buying conditions.
In addition to the affordability boost, the savings puts extra money into buyer’s pockets which can assist with transfer duty and costs which will result in more transfer duty revenue for government and increased economic activity, he concludes.
Photograph enclosed: Samuel Seeff, Chairman of the Seeff Property Group
Author: Gina Meintjes