Turning home improvement dreams into reality often comes with an exorbitant price tag, and the necessary funds are not always readily available.
Image: Supplied by DAG
Credit demand increased by 5.0%, aligning with market expectations for the month, in June this year.
Commenting on the Private Sector Credit Extension (PCSE), Frederick Mitchell, an economist at Aluma Capital, said that since the interest rate cuts began in September 2024, overall credit growth has accelerated, with most subcategories showing increases during June.
However, he said mortgage advances and credit for fixed asset purchases remain restrained, despite the ongoing interest rate cuts initiated in September last year.
“Demand for property continues to be sluggish in South Africa, indicating low capital expenditure by households and businesses. High consumer debt levels, stagnant wages, and increasing living costs still constrain recovery in this sector.
"Nevertheless, the full benefits of lower interest rates are anticipated to materialise later in 2025, as household disposable incomes improve, driven by positive market sentiment and potential additional rate cuts by the South African Reserve Bank (SARB),” Mitchell said.
Aluma said that in June, instalment credit sales grew by 0.8% month-on-month, following a 0.9% increase in May, with an annual growth rate of 6.5%.
The financial institution said that over the past two years, consumers have relied more on short-term credit to cope with rising living expenses, shown by a 7.1% increase in other loans and advances, up from 7.0% in May.
Mitchell said with inflation remaining favourable, continued rate reductions are expected to further enhance disposable incomes, promoting increased demand for goods and fixed assets in the second quarter of this year and beyond.
The latest inflation numbers for June continue to support the possibility of a further interest rate cut by the Reserve Bank this week, says Herschel Jawitz, CEO at Jawitz Properties.
He said while upside risks remain, fuel prices are projected to fall marginally in August, and inflation is still sitting at the lower end of the target range.
“The residential property market has started to benefit from the cumulative one percent drop in interest rates since last year, with overall buyer demand improving across all price levels, including among first-time buyers.
"With the increase in demand, we are starting to see the first signs of a rebalancing between supply and demand, which in the medium to long term is positive for property prices. In addition, a further rate would help to improve consumer confidence, which bounced back from a three-year low of - 20 to a less pessimistic - 10," Jawitz said.
Meanwhile, Wendy Beaumont, the executive for Unsecured Lending at Nedbank, said property is one of the most valuable assets you can own.
Given this, many homeowners are always looking for ways to maintain and upgrade their homes, whether it is to personalise their space, improve everyday functionality, or stay in step with modern décor trends. But turning those home improvement dreams into reality often comes with an exorbitant price tag, and the funds are not always readily available.
“For those needing financial support to get started, 2 common options are personal loans and home loan refinancing. But how do you know which route is suitable for your project, budget, and long-term financial strategy?
"To make informed, responsible decisions, it is imperative for homeowners to know the key differences, pros and cons, and ideal use cases for each financing method,” Beaumont said.
The financial institution said a personal loan is typically an unsecured loan that has an assessed interest rate and term and ranges from 12 to 72 months. It said its approval is based largely on one’s credit score, income, and expenses, and the funds can usually be accessed fairly quickly.
By comparison, procuring funding from your home loan may involve more steps, depending on the option selected.
You can either apply for a further loan (which is new money borrowed against their property’s increased value and would require you to get a new bond) or a readvance that lets you reborrow funds you’ve already repaid into your original bond.
Independent Media Property
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