A closer look at the interest rate forecast for 2023.

The Monetary Policy Committee (MPC) recently met and delivered its decision on interest rate policy going forward in 2023. While there has been anticipation and speculation surrounding the announcement, particularly in the property and real estate sectors, the report mostly confirmed everyone's fears of further increases this year. 

Further rate increases were highlighted

The South African Reserve Bank has announced its decision to raise the benchmark repo rate by 50 basis points to 7.75% at its March 2023 meeting, surprising the market, which had expected a smaller 25 basis points increase. This marks the 9th consecutive rate hike since policy normalisation began in November 2021, bringing borrowing costs to the highest level since May 2009.

Monetary policy decisions will remain sensitive

Despite a decrease in inflation for the third consecutive month, the risks of a further rate increase were highlighted by policymakers. The uncertainty of economic circumstances means that monetary policy decisions will remain sensitive to the balance of risks to the outlook. 

Policymakers revised the headline inflation for 2023 upward, expecting it to reach 6% from the previously projected 5.4%. This increase in inflation is mainly due to higher prices of core goods and food in the near term. On a more positive note, food and fuel inflation is expected to ease, resulting in a headline forecast of 4.9% for 2024 and 4.5% for 2025. (Tradingeconomics.com)

Consumers are advised to be cautious and prioritise paying off their debts and keeping up with repayments on their home loans to mitigate the impact of potential interest rate hikes. Many households have taken on increased debt during the pandemic, and higher interest rates could further pressure household budgets.

Bond Calculators such as Ooba are extremely useful for preliminary budgeting.

Advice for homeowners 

The property market has been experiencing a period of instability due to the unpredictable interest rate environment. However, the market is expected to stabilise in the coming months as interest rates are expected to remain relatively low. This stability will be welcome news for homeowners and prospective buyers alike.

Despite the risks of a potential interest rate increase, it is essential to remember that interest rates are just one factor that affects the property market. Other factors, such as supply and demand, changes in government policies, and economic conditions, will also have an impact.

"It is important to keep a close eye on the property market and any developments that may impact it. Prospective buyers should keep their options open and avoid over-committing to a property if interest rates increase beyond what they can afford," says Martin Hayward of Ikonic Real Estate. 

Tip: "At the same time, those with existing home loans should consider refinancing to take advantage of lower interest rates while they last."

Uncertainty in the market

The interest rate forecast for 2023 remains uncertain, and there are risks of a potential increase. However, the MPC has clarified that they will monitor economic circumstances carefully and make policy decisions based on a balanced outlook assessment. 

Overall, the outlook for the property market remains positive, and those looking to buy or sell property should keep a close eye on any developments that may impact it.

Contact Ikonic Real Estate today.

For Real Estate professionals you can trust and rely on for industry-related expertise, contact us below for more information.

If you are looking to live in Silver Lakes Golf and Lifestyle Estate, Silver Stream Estate, Lombardy Estate & Health Spa, The Ridge Estate, Six Fountains Estate, or Willow Acres Estate and surrounding areas, then Ikonic Real Estate is your preferred property practitioner to assist you in all aspects of the selling and buying process.

Office Number: 083 452 5599
Cell Number: 083 452 5599
Email: martin@ikonic.co.za

Ikonic Real Estate holds a Fidelity Fund Certificate issued by the Property Practitioners Regulatory Authority.