With the steadily rising interest rates placing a hold on most people's search for new property, Ian Wason of mortgage experts BondBusters anticipates that we could well see a rise in remortgages as people stay put and choose to renovate their current homes instead.
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As the crippling rates hikes continue to make buying new homes less and less affordable one has to feel that, for the next while at least, South Africans who want to ‘move up' in the world are going to have to sit tight. Further rate hikes have not been ruled out and it is agreed that most upwardly mobile South Africans are going to have to make do with what they've got for the time being. But, says Ian Wason, MD of mortgage and remortgage specialists BondBusters, that doesn't mean they have to sit still.
"Of course the rate hikes are going to have an adverse effect on the mortgage market, but that doesn't mean we see the next few months to be a period of total stagnation. People are still after some form of lifestyle change and we expect to see the number of renovations go up. This means activity on the remortgage front."
"While families may not be able to finance an entirely new property, they may be able to secure finance for an additional room or bathroom. You might even see a number of people building swimming pools or adding garages." "While new dream homes may have become pipedreams for the time being, people could renovate what they already have if they are in need of a change."
People who apply for remortgages may well find that they can counter the interest rate rise that is set to cripple so many over the next while "If their salaries have increased since they first secured the loan people may well qualify for a further advance or a better rate of interest than they are currently getting from their banks. Shopping around for the best rate on anything should be second nature in the current environment."
Moving home under the current economic conditions would be trying on several fronts says Wason.
"Apart from the increase in the cost of financing a new home there is the added worry that people who sell in the next while aren't going to get a good deal for their current homes. And then there are transfer costs of nearly 15% in South Africa. All in all, many people will have to shelve ideas of moving. Getting a remortgage negates things like selling your current home below its potential value as well as the transfer costs involved with buying a new property. So, if wanting a pool is one of the reasons you want to move, rather put one in to your existing property. You may even find you come to love your current house again."