EmaSwati Struggling With Monthly Mortgage Payments Must Contact a Professional- Seeff Eswatini

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By Phesheya Mkhonta

It appears the Central Bank of Eswatini (CBE) is not relenting on hiking interest rates, which is bad news for those with monthly mortgage payments.

Seeff Eswatini Licensee, Anthony McGuire believes that the next three to four months will likely be difficult for buyers and sellers as well as for people with monthly mortgage payments.

McGuire has therefore urged people who find themselves under pressure to reach out to them or any professional as soon as possible.

“The current tough situation we are in can take three to four months for buyers and sellers so I urge people who are under pressure to reach out to us so we can try and manage their situation with banks. Those under pressure must also ensure that they avoid a situation whereby non-payment or arrears build up to the extent that when they sell they have negative equity on the property, or end up having no property and still owing the bank”.

McGuire continues “As Seeff Eswatini we are currently dealing with a situation whereby a client bought a property when the prime lending rate was at around 7.50% and their affordability was marginal. This means they are struggling at the moment, but we are now working with the bank to see what we can do. The good thing is the client reached out to us, but their credit rating has certainly been affected.”

Worth noting is that the interest rate currently sits at 7.75% and the prime lending rate at 11.25%. Interestingly, the interest rate was 4.0% in April 2022 and the prime lending rate was 7.50%.

The Seeff Licensee has also called upon banks to look through the trends and identify people who are defaulting or likely to default.

“I am currently engaged in an exercise with the banks where I’m encouraging them to look through the trends and possibly identify those clients that are likely to default, as we are probably three or four months away from the property market settling. In this three-month or four-month period, properties stay longer on the market, which affects sellers and buyers on the other hand find it hard to qualify for housing loans.”

He also strongly encouraged the CBE to seriously consider policy and the implications of the rate hike on the local economy.

“In a weak economic climate, interest rate hikes can have a significant impact on the property market. The higher interest rate drives up the cost of borrowing which puts pressure on existing homeowners with housing loans as well as on potential buyers.” 

Impact on property buyers

The immediate impact is usually on the cost of debt affecting consumers including homeowners with housing loans, but also prospective buyers who require finance. 

It then becomes more difficult for prospective buyers to qualify for home loans, and usually, the deposits required by the banks will increase so as to reduce the bank risk.

Higher interest rates also drive up the cost of living which further impacts the ability of people to purchase property and in some instances may even drive people into default situations. 

Buyers will need to budget for higher repayments and a bigger deposit. That said, price growth usually flattens and buyers who are able to get into the market can benefit from flat prices and the ability to negotiate a better price.

Impact on property sellers

Properties will take longer to sell. Fewer buyers in the market mean that buyers will be in a stronger negotiating position. That will put asking prices under pressure. 

For serious sellers, it would likely mean that they will need to drop their price to conclude a sale, especially if the property is overpriced.

While some sellers may be tempted to rather hold out for a better offer, the risk of this lies in that it may not be forthcoming within the immediate time frame. 

Sellers who would be looking to buy another property should therefore also consider the time value of money. If they hold out for too long, they too may have to pay a higher price.

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