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Interest rate hike: This is what you will pay for your bond or loan repayment

By Bahle Gama

Last week the Central Bank of Eswatini (CBE) announced that interest rates have been raised by 25 basis points from 6.50 per cent to 6.75 per cent, resulting in the Prime Lending Rate increasing from 10 to 10.25 per cent.

This inevitably meant that there will be an additional payment to one’s monthly bond or loan repayment. The Eswatini Daily News spoke to REMAX Eswatini’s Broker/Manager Sales Elroy Johnston to break down the payment plan and how much it would increase.

Johnston calculated at a payment term of 20 years where he stated that if a person’s bond amount is E750 000, at the previous rate of 10 per cent they paid E7 237.50 per month and with the 0.25 per cent increment, payment will now be E7 365 showing a different amount of E127.5

He stated that property owners and future buyers needed to prepare themselves for the worst-case scenario of having interest rates climb by roughly 1 per cent over the year.

“We hope not because these are times when a person has to make room in their budget earlier than to be caught short if interest rates were to climb further.”

Johnston stated that the negative impact of a further rise in interest rates on the real estate sector in Eswatini is that it is likely that the property market will quiet down, especially on the sales of property, and there will be a higher demand for rental affordable housing.

“The impact caused by the rising interest rates is likely to be gradual and unlikely to cause any form of housing market crisis. We are at a time where property owners will need to price their properties fairly and partner with a reliable real estate professional to ensure they sell for the full value,” he said.

As a man that sees the cup half full, Johnston said the positive news in all the commotion caused by the hike, “we might be at the peak of the interest rate hikes so we might see the interest rates starting to stabilize in the coming months or year.”

In response to how the hike will affect the housing industry generally, he said it might weigh in on the market and could result in slightly fewer buyers.

“However, we do anticipate the market to remain stable and still see good activity. Banks are also open to supporting new and existing clients and buyers should not hesitate to get into the market but should factor in the additional extra costs,” advised Johnston.

The broker added that the asking prices for properties on sale will come under pressure, therefore, sellers will need to heed the advice of Estate Agents and adjust pricing if they want to take advantage of the demand in the market.

In terms of advice to homeowners with an ongoing bond, Johnston said that life is all about opportunity cost, thus might need to forgo some expenses to better service their bonds with the bank.

For potential buyers on the other hand, Johnston said “these are times where you can better budget for your monthly repayments.”

He stated that while the interest rate increase may inject a little caution, it should not frighten buyers out of the market as many financial institutions offer tailor-made packages (such as 0 per cent deposit on home loans) structured to the clients’ preference.

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