Absa disappointed by rate move

Johannesburg - The SA Reserve Bank's decision to leave the repurchase rate unchanged was a "disappointment", Absa said on Thursday.

The decision did not help "an already heavily-indebted household sector" struggling with debt repayments, Absa said.

A lower mortgage rate would have further improved the affordability of housing over a wide front, said Luthando Vutula, managing executive of Absa Home Loans.

"A further cut in interest rates would have implied that mortgage repayments would have dropped by 26.3 percent since December last year when the mortgage rate was still 15.5 percent," he added.

The monthly repayment on a R500 000 mortgage loan over a 20-year term would have dropped by another R169 if there had been a 50 basis interest rate cut, he said.

"This implies a cumulative monthly saving of R1 778 on a R500 000 mortgage loan since December last year."

According to Vutula, the economy was expected to remain under "a lot of pressure" until late this year.

This would continue to impact employment, household income and the property market.

In view of these developments, he encouraged consumers to keep expenses under control and look for affordable properties, taking account of their financial position.

Marcel de Klerk, managing executive of Absa Vehicle and Asset Finance, said another 50 basis points cut would have brought further relief to customers.

"We don't expect the vehicle market to rebound until 2010 as sales are based on customer confidence, and this is seriously lacking at the moment.

"Affordability is still an issue and the main reason customers have fallen into arrears, especially in the lower income groups," said De Klerk.

A further reduction of 50 basis points on vehicle finance of R150 000 over a 60 month term, would have brought relief of R37 per month.

Since December 2008, the relief would have been R384 per month.

- Sapa