economy

SA Prime Lending Rate

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Prime Lending Rate – South Africa

What is a Prime Lending Rate? / https://en.wikipedia.org/wiki/Prime_rate

A prime rate or prime lending rate (PLR) is an interest rate used by banks, usually the interest rate at which banks lend to favored customers—i.e., those with good credit. Some variable interest rates may be expressed as a percentage above or below prime rate.

We had our first Monetary Policy Committee (MPC) meeting of the South African Reserve Bank last week. The MPC decided on 16 January 2020 to lower in Interest Rate by 25 basis points which meant that the PLR dropped from 10.00% to 9.75%. The next meeting date in scheduled for 17 to 19 March 2020.

IR 2020 4

The lower the PLR the less you pay on your bond, car finance etc, unless your rate is fixed on a fixed percentage with the financial institution. Lowering the Interest Rate is always seen as a positive move for the property market as this will benefit both Buyers and Sellers. Buyers will have a slightly reduced bond repayment which will affect their affordability profile. At the same price, Sellers will have more buyers who can afford their properties due to the reduced rate, etc etc. The difference in repayment of an average bond amount is very small, but this changes as the bond amount gets higher.

Example of bond repayments:

  1. R 1 200 000 bond on a house at Prime (9.75%) over 20 years will cost you R 11 382.20pm as a repayment. The same bond at 10.00% over 20 years would have cost R 11 580.26pm, a saving of R 198.06pm.
  2. R 5 000 000 bond on a house at Prime (9.75%) over 20 years will cost you R 47 425.84 as a repayment. The same bond at 10.00% over 20 years would have cost R 48 251.08, a saving of R 825.24pm

The attached PLR Graph shows the rate changes since June 1998, going up to 25.5% in August 1998 coming down sharply during the next 14 years with some spikes to 8.50% in July 2012. The last 10 years have been constant between 10.50% and 8.50%.

Prime Rate

The biggest benefit to the MPC lowering the rate is that it creates a positive market sentiment which means that buyers and investors are happy to invest in property. The most important factor in the current market is still PRICE. We believe, as there are quite a lot of stock available that we are still in a Buyer’s Market and Sellers need to price correctly in order to get Buyers interested. “Over Pricing” is very negative as many over-priced properties never sell.

The time for making a killing on your property isn’t now. But if you are prepared to sell at a MARKET RELATED price and your property is priced accordingly, you will. Buyers will always negotiate but within reason if your price right.

2020 Have kicked off with a BANG and we hope that you will have great year. Looking to sell? Let us know, we would love to sell your property.

Juanita Steyn – 083 604 1231
Marnus Steyn – 072 264 7806

For all out stock, show-days, listings and news please go to www.steynrealty.co.za

RealPro YTD Stats

2 Comments

Looking at our stats from approved transactions this year so far i have to thank two companies for their commitment and great service in assisting our buyers and sellers. Attorney Firm Trutter Crous & Wiggill and Bond Originator Payneless Bonds ….. thank you for your help to date!

Planning and strategizing for the future is no good unless you know what you have achieved thus far. In an industry as volatile as ours where there are so many external factors that can influence the success of the agent and agency we have to be well aware of the pitfalls and try to avoid them as far as possible. One of the ways we try to do this is by looking at certain statistics from transactions that have been successfully registered to date.

The more of these deals there are the better but let’s just say we have enough 2012 data to see some interesting stats coming through.

 “The Banks” are very unpopular when it comes to granting home loans and for most buyers this is where it all goes wrong. Not too harp on the subject but the banks are tough, very tough, but for those applicants who have their financial affairs in order it does seem as if the banks are getting a bit more lenient ……… all be it minutely so!

Looking at the clients that have successfully bought properties from or through RealPro this year it is interesting to notice that a very small percentage have been successful with Nedbank and that almost 22% of the transactions were 100% CASH deals with no bond application needed. FNB got almost 15% of the pie and ABSA got just over 22% of the business. Standard Bank is leading the race at this stage with just over 33% of the allocated bonds …… obviously looking to grow their bond book.

Buyers always have a choice of where they want to place their bonds but the repayment rate plays a big part with prime + rates being the norm at the moment. Just as a matter of interest, the average sales price of the properties making up the above data comes to R 845 000 which is also in line with the national average.

Many buyers still apply for 100% bonds in the hope that they don’t need to pay a deposit. In our case, 48% of our applicants applied for 100% bonds and 61 % of those got approved. The average purchase price where 100% bonds were achieved was R 857 000. Average price for all the CASH transactions was R 570 000. Even though it seems as if some of the Banks may have loosened their Credit Criteria slightly, buyers should still plan and prepare for a 5% to 15% deposit to secure a home loan, especially when buying in the higher price brackets of R 1 000 000 +.

Having a good Bond Originator on your side to aid your buyers also helps as they understand the application processes better and can motivate certain issues to the bank which might be overlooked. With the Bond Repayment Rate dropping by 50 basis points from 9% to 8.5% on Thursday 18 July 2012 many prospective buyers might now be in a better position to afford that perfect new home.

Credit profile still plays a huge role for applicants and we don’t see that changing soon so make sure your credit profile is clean and all accounts are up to date and paid on time.

Happy Buying and Selling ……