Credit growth slows down
According to the Reserve Bank, private sector credit extension (PSCE) rose 23.13% in the year to July, down from 24.99% in June. This slowdown is not enough to remove the pressure for higher interest rates fuelled by soaring inflation.
This is a sign that steeper lending rates have already started to curb consumer borrowing. Analysts say that the downtrend is likely to gather momentum in the months ahead, as more stringent lending rules introduced in June and the effect of six interest rate hikes since the middle of last year feed into the economy.
Investec economist Annabel Bishop said that the risk for an additional interest rate hike is mounting due to the deterioration in July’s inflation outcomes.
The National Credit Act (NCA) and Debt Counselling
The National Credit Act (NCA) came into effect on the 1st of June this year and is now granting consumers the right to apply for debt counselling. Registered Debt Counsellors are the only ones that can provide debt counselling.
Nedbank is one of the largest lenders in South Africa, and has always offered financial advice to clients, including those that are in financial difficulty. Credit providers cannot be debt counsellors, but Nedbank still offers debt counselling via a dedicated Nedbank Debt Rehabilitation and Recovery Department.
Mortgages: Fixed-rate mortgages
Fixed-rate mortgages are common mortgages for homebuyers because the monthly payments are stable. The interest rate at which you take out the mortgage will be the same interest rate you pay for the life of the loan, regardless of the lifespan of the loan.
Adjustable-rate mortgages
Adjustable-rate mortgages (ARMs) usually start with a lower interest rate and a lower monthly payment, making them rather popular. The interest rate can change during the life of the loan which means that your monthly payment can increase or decrease.
Why it is wise to repay your bond as fast as possible
Most homeowners’ annual earnings are increasing year-on-year ahead of the current inflation rate, due to improved conditions of South Africa’s economy.
Middle class savings should be rising by about 10% per year, but instead, consumer spending is rising, which in turn is pushing up inflation. To achieve greater savings, homeowners should pay off their bonds at a faster rate. Unfortunately, most bondholders don’t realise what significant savings increasing their monthly payments slightly above the minimal required repayment level can make. Bondholders will also be able to invest in a second or third property by doing so.
Choose the right bond for you
There are so many homeloan choices available; it may be hard to identify the bond that is right for you. All banks provide a homeloan for anywhere from 10 to 30 years, repayable monthly at an interest rate margin lower than prime rate. All of them look so attractive – how do you make a choice?
Everyone has different needs and circumstances and everyone requires unique solutions. You need to choose a bond that best suits your needs and situation and that best meets your requirements.