This year, the word that has captured everyone’s attention is inflation, and with high inflation comes cycles of interest rate hikes.
On Wednesday, the Monetary Policy Committee of the Bank of Namibia increased the repo rate by 50 basis points, bringing it to 7.75%. Consequently, the prime lending rate is now at 11.50%, marking its highest point since 2009.
It’s astonishing to think that there was a time when it reached 21% in 1998. What is concerning is the uncertainty surrounding the duration of the current hiking cycle.
However, market sentiment suggests that there may be one or two more interest rate hikes before reaching a peak, and the central bank discontinues further increases.
Despite the fact that the higher inflation is not driven by demand, consumers, bond owners, and home buyers are being affected by yet another rate hike. Currently, the home loan rate stands at 12.50%.
We are advised to alter our spending habits by diverting expenditure away from luxuries or non-essential items, even though this has been the case for the past few years due to sluggish GDP growth, high unemployment, low wage growth, and most recently, significant increases in food prices.
Now is definitely not the time to neglect your financial due diligence, especially when considering a major purchase like a house. The risks are too high. The rapid rise in borrowing costs has certainly dampened the housing market.
First-time homebuyers, many of whom come from the emerging middle class, are encountering affordability challenges, leading to a decline in overall sales volumes.
Sellers, on the other hand, should be aware that house price growth has stagnated. This means that accurate pricing is crucial for those looking to sell at the present moment. Buyers will exert pressure, and since they do not face fierce competition, they will seek price concessions.
Rectifying an error is much more difficult than preventing one. That is precisely why I am so passionate about educating first-time property buyers and investors. If you are an existing homeowner already stretched thin financially, rising interest rates can be devastating.
I would recommend reaching out to your bank as soon as possible to explore strategies such as refinancing the property, which may help make monthly installments more manageable. However, for first-time buyers, I strongly discourage purchasing a house for the maximum approved amount. This approach allows for some flexibility when interest rates rise.
For enquiries, text, call, or email #yourhomegirl Justina Hamupembe:
Cell: +264812726001
Email: justina@chili.com.na
