Letter to Tito

[janp0s]

http://www.news24.com/News24/MyNews24/Letters/0,,2-2127-2129_2138270,00.html

All we, the voting public ask is that when you consider to increase the Prime Lending Rate again, to consider separating Housing Loans from General Debt Loans.

We really need to get more people into their own homes and if the Lending Rate keeps on increasing, the marginal home buyers will not be in a position to buy a house and the ones that do have houses will be put out on the street because they will no longer be able to afford the increasing repayments.

So please, Mr Mboweni, be kind to us poor home owners that have to face increasing Bond repayments just because the rest of the population can't behave themselves with their spending

These ppl crying about the interest rate rising, wtf did they think when they bought their houses... its going to stay low forever.

 

[BobbyMac]

janp0s: with all due respect, you are not coming across as someone who knows what they're talking about. Economists all over the country agree that a move like this would be a very good move.

 

[Sneeky]

I disagree and would be interested to hear the argument for the split
Saw some mention of this a while ago on telly, separating bonds from general credit interest rate. I think even Trevor Manuel was involved in the discussion.

I think it is a terrible idea.
Why should home owners be protected when the value of their investments is going through the roof??? Madness.
All this will do is provide more fuel to the already rocketing property prices which inturn will make it even more difficult for the havenots to get a home.

Property prices have shot up and salaries have not nearly kept pace.
If you cannot afford your bond, trade down Pepe Cousins

I really hope this never ever happens.

 

[janp0s]

Thats ur opinion BobbyMac...

But I will disagree with you... while the interest rates were low I pushed all my free cash into my bond... Basically by the end of the year my house will be mine and no longer the bank's.

This gives me leverage to buy another 2 properties and place tentants in both and allow me not to stress if I can afford the bond payments... thus all because when interest rates go up rental payments increase.

 

[Sneeky]

when interest rates go up rental payments increase.

Not necessarily, if there is an oversupply, which could well happen, you might be sitting with empty properties and bonds

 

[GavinMannion]

http://www.news24.com/News24/MyNews24/Letters/0,,2-2127-2129_2138270,00.html

These ppl crying about the interest rate rising, wtf did they think when they bought their houses... its going to stay low forever.

I personally think it is a very good idea, the biggest problem we have is consumer spending, credit cards, personal loans, car loans, over drafts, shop cards etc...

Your primary home rate should not be linked to the above. I bought my main property and gave myself a nice 5% interest rate breathing room, now that has been eroded away and things are starting to look worrying.

If you look at other comparative countries it was not completely naive to expect our interest rate to hover around the 10% mark.

I don't know enough about economics to see the entire picture though...

 

[janp0s]

There can be an oversupply, but if no one can afford the properties you will have to rent...


And NO house prices will never drop, they will basically stay the same for a time before increasing once more...

Look at the time when interest rates where 25% in SA... the only place house prices ever dropped was in Japan.

 

[rwenzori]

Economists all over the country agree that a move like this would be a very good move.

You have to be telling an untruth here because economists never agree. Such a move would in one way or another result in lower rates being paid on invested cash, so I got none times sympathy and wish rates would climb through the roof.

 

[rsachoc]

There can be an oversupply, but if no one can afford the properties you will have to rent...


And NO house prices will never drop, they will basically stay the same for a time before increasing once more...

Look at the time when interest rates where 25% in SA... the only place house prices ever dropped was in Japan.

I hate to break this to you, but in parts of America, right now, house prices are dropping, sometimes by up to 20%

Your wide-ranging statement is just not true.

 

[janp0s]

I hate to break this to you, but in parts of America, right now, house prices are dropping, sometimes by up to 20%

Your wide-ranging statement is just not true.

Please provide links and facts, those are mostly rumors

 

[Sneeky]

Just google US property market.

The point here is that the year on year growth over the last 4-5 years locally has made entry into the market very difficult for most.

Someone that bought a home 5 years ago for R300K can sell that now for around the million rand mark.
My colleague bought a townhouse for R180K 4 years ago and she sold it 2 weeks ago for just under R550K. Not to shabby hey.

 

[janp0s]

.

Now must I apologize because I am intelligent and now how the market works

Typical africa logic... because I took the time to educate myself about the market I must now refrain from using the information to my benifit.
.

 

[GavinMannion]

You think it was easy way back when? I also thought I would never afford a house. It takes disciplined and clever saving, and sacrifices of most luxuries. Prime was over 25% IIRC when I had to make my first bond payment in the mid 80s.

I bought my first house with a wopping interest rate of 26.5% as I was under 21....

However it only cost R195 000... It's easy to sit and judge people but in reality it is really difficult to get on the property ladder at any time.

 

[GavinMannion]

Now must I apologize because I am intelligent and now how the market works

Typical africa logic... because I took the time to educate myself about the market I must now refrain from using the information to my benifit.

Sorry to say but you are an ignorant moron.

Yeah possibly but I can spell

 

[JBFRobisher]

It's easy to sit and judge people but in reality it is really difficult to get on the property ladder at any time.

Of course. But the whiners want the fancy car, the plasma TV, plenty entertaining, nothing but the best, and then complain they can't afford a house. Ag shame!

 

[GavinMannion]

Of course. But the whiners want the fancy car, the plasma TV, plenty entertaining, nothing but the best, and then complain they can't afford a house. Ag shame!

who would that be?

The people I know who are struggling to pay for their bonds don't have fancy cars, plasma tv's or broadband internet...

To buy a 1 bedroom flat in Randburg will now cost you about R500 000. The average starting salary for a Network Engineer or Accountant is what R8 000 gross?

So after renting for 3 years they can just afford the bond and nothing else.

It's a free market and this is the price we pay, that is fine. But insulting people who are trying to better their lives is quite disgusting.

 

[rwenzori]

Of course. But the whiners want the fancy car, the plasma TV, plenty entertaining, nothing but the best, and then complain they can't afford a house. Ag shame!

Yes, like Tito said:

"We experienced a situation of low inflation and rates coming down - but because people are not used to living in a low interest rate environment they thought Mr Mboweni had just declared a party here.

"People went into all kinds of expenditure - some of it was necessary expenditure - then they thought maybe interest rates will go down further and they bought second 4x4s - now we have these Hummers - then people began to use their access bonds for current consumption.

"It was a good idea for someone to be granted a mortgage - which I support fully - but no sooner through revaluation they then had an access bond for another car and other things," stated Mboweni.

 

[Sneeky]

Gavin, what do you think will happen to the property prices should the bond rate be separate from the main interest rate?

I would wager that instead of a slowdown in year on year growth of the prices we will see them skyrocket even further.

This will only benefit those that already own property or those that are already committed to bonds. If anything it will make the situation a lot worse for those wanting to enter the market now.
I am interested in opposing views here as I am coming from a position of wanting to buy and can understand to a certain extent people that have already bought and are feeling the pinch now calling for relief, but it is a bit selfish I think.

Where are the economic gurus today?

 

[GavinMannion]

Gavin, what do you think will happen to the property prices should the bond rate be separate from the main interest rate?

I would wager that instead of a slowdown in year on year growth of the prices we will see them skyrocket even further.

Firstly I will make it clear that I am no economist, and my vocal reaction was to the arrogance and smugness of the poster and not the main topic.

Back to your question, I am not advocating them dropping the homeloan rate and increasing the main interest rate. I am advocating for a split so that each can be handled on it's own merit.

It is obviously better for the economy for people to be placing their money in strong assets such as property instead of splurging on credit card debt.

So split the rate, increase the personal lending rate which will effect cars, credit card, personal loans and such sort and leave the property rate as is for now.

Possibly make it legislation that any secondary bonds are charged at the personal interest rate and not the property interest rate to stop people using their homeloans as a personal cheque account?

 

[janp0s]

I drived a piece of **** for 8 years to be able to afford my house... I didnt have any furniture for 2 years..

Only on my 3rd year did I buy a tv and other luxury items.

Its called postponing the intimidate gratification factor.

And look now my house is nearly paid off