Low Interest Rates Promotes Debt

Home Loans and Property News

IBO : Independent Bond OriginatorsEconomists are becoming increasingly worried of the fact that household doubt in South Africa has increased so rapidly in recent years.

On Tuesday, ABSA released an economic report that highlights Home Loans and Mortgages as one of the main reasons for the sharp increase in household debts.

Low interest rates have boosted consumer spending, which in turn has allowed sellers to raise the prices of their homes. So although more people have been able to qualify of home loans, the amount needed to purchase their desired homes has also increased.

Property24.com reports that, with interest rates at levels unfamiliar to most people, a number of people have used this opportunity to buy second homes as holiday homes and/or for speculative or profiteering purposes.

Meanwhile, the emerging black middle class is another factor contributing to the overall demand for housing and other goods in South Africa.

Property commentators believe that these and other circumstances, such as political pressure to finance the low income earners, may end up biting us from behind.

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