This table shows international rates before and after October cuts.
Does our rate appear to be a bit on the high side?
Let's look at the impact of our high rate...
On a mortgage of R1000 000, over 20 years:
At 15.5% interest (SA), your monthly payments are R 13,538.81
At 1.5% interest (USA, UAE), your monthly payments are only R 4,825.45 WOW!
At 3.75% interest (Europe), your monthly payments are R 5,928.88
At 4.5% interest (UK), your monthly payments are R 6,326.49
Methinks something is seriously wrong with this picture... why are we at such a huge disadvantage in South Africa, in a country with vast natural resources, a large labour force,a strong economy (according to the government) and vast unemployment?
If we had realistic interest rates, then more new business startups would be able to fund capital expenditure, which would lead to increased employment and increased growth of the national economy.
Can anyone explain why our interest rates are so out of whack with the rest of the world?
I don't know why our rate is so high but I am Very greatful it is.
ReplyDeleteIt is inflation (which gives high prime rate) that will makes us property investors RICH.
To explain:
I buy a house for R 500 000.
That price is locked in.
All things being equal that property must increase in value at the inflation rate over a extended period of time.
If inflation is lower house price will increase in value at a lower rate.
Rent Also will increase in line with inflation.
The only thing that does not increase is your locked in price of the property.
So yes the repayment PAIN is indeed greater in the beginning, but because the property value and rental increase faster in a high inflation Country this pain is reduced much faster over time.
Do you realy want to invest in a property in a low inflation Country that is only going to increase the property and rent value by a couple of percent PA.
Hi David, I believe it is all relative. If inflation is 1.5% and you have an investment earning 6.5% then you are doing 5% better than inflation. In order to do 5% better than our current inflation level, you would seriously battle to find an investment with a high enough inflation level.
ReplyDeleteWe are achieving only 10% rental escalations while paying 15.5% interest. If the interest came down to 10%, we would still get 10% escalation.