'Strong likelyhood' of further rate cut

There is a strong likelihood of a 50 basis points rate cut when the SA Reserve Bank's Monetary Policy Committee (MPC) meets next week, estate agency group Seeff said on Wednesday.

The recent announcement that the inflation rate was at 3.7 percent was "very promising", Seeff said in a statement.

At an inflation rate of this level -- rather than the anticipated 4.0 percent -- there was a strong likelihood of a further 50 basis points interest rate cut, which would bring the prime rate down to 9.5 percent, said chairman Samuel Seeff.

"We are really at the lowest interest rate for over 30 years... I can't see anything fundamental changing significantly between now and the next MPC meeting so I see an interest rate cut as very likely."

Seeff said a cut would be "a real psychological boost for the market" and provide impetus for buyers to make a move.

"The buyers are still in the pound seats, which largely comes from sellers still wanting 2007 prices -- pre-National Credit Act prices --and the truth is, if they are wanting those prices, they are going to have to wait a while."

However, if a seller had his property on the market at the right price, there were enough buyers out there for transactions to happen.

"Banks are currently only approving 15 percent of applications for 100 percent loans, but they are coming back and making offers to clients, for example asking for a five percent deposit."

Those buyers who had at least a five percent deposit in hand were more likely to have their bond applications approved.

"I think the market will be better in September than in August as the start of Spring gets people looking at their plans for the rest of the year."

Seeff predicted that South Africa would have "a bit of a stronger summer than we have had for the last two years," on the back of all the positive sentiment that came out of the World Cup, the completed infrastructure and the low interest rates.

"Generally, we are all realising here in South Africa that we may have issues which challenge us every day, but certainly the rest of the world has greater economic challenges, and our house market is likely to outperform most."

Turnover, if not house prices, would increase in the next few months according to the usual seasonal patterns, Seeff said.

Sapa

Posted at 10:30AM Sep 01, 2010 by Editor in Home Loans  |  Comments[1]