It is a well-known fact that the recent downgrade of South Africa to junk status will have a negative effect on consumers in general. This downgrade affects us all in one way or another, and while some are tempted to stick their heads in the sand and pretend that little will change, it is to their own detriment. It may take a while for South Africans to feel the effects, but feel them we will.
Concern is a natural reaction, but now is the time to keep our heads about us and make calculated, informed decisions.
Junk status explained
When someone has a bad credit rating score and tries to apply for a loan, they find that credit is difficult to come by, and, when approved, it’s granted at a higher interest rate. The same will be true when the country tries to borrow money. It will therefore be necessary for financial institutions to hold more money in reserve and thus, loan applications will be met with additional scrutiny and careful consideration. A rise in interest rates seems unavoidable, but if you’re looking to buy, it’s best to go in with your eyes wide open and make wise decisions which will serve you going forward.
Tips to survive Junk Status
There are certain things we can do to weather the storm and not panic;
- Pay off whatever debt you can. Get rid of unnecessary store card type debt and develop a mindset of paying cash rather than handing over plastic. The less debt you have, the less you will be affected by the imminent credit increase. Pump any extra money into your bond to reduce the capital portion of the loan – but make sure you have access to this facility should you need to make use of it in the future.
- Don’t rush blindly into fixing your bond rate now. Seek solid advice as to when the best time would be. It may be a while before interest rates increase.
- If you are already struggling with your bond repayments, don’t rush out and sell your home in a state of panic. Rather consult a trusted real estate professional and seek their advice on a plan of action. They know the market and are best suited to advise you. Rentals are also likely to increase, so get the right advice from the start.
- If you are a tenant and intend on buying a home at some stage, this is your opportunity to make the most of the financial climate. Not only will your savings benefit from the increase in interest rates, but the housing growth curve will start to slow in your favour. It’s all about preparation and getting your ducks in a row from the very start.
All Platinum Century Property agents are highly skilled and work closely with industry leaders in order to give you the best possible advice. Make an obligation free appointment today for good, solid South African property advice.