Ooba Calls for More Interest Cuts - 02-05-09

February 5 - Saul Geffen, the Chief Executive Officer of top South African bond originator, ooba, called for the Reserve Bank to cut interest rates significantly as the Monetary Policy Meeting takes place this week.

"Property owners won't benefit from half measures this time," said Geffen, referring to the half percent interest cut rate just before the end of last year in December. While at the time ooba praised that cut, the company now believes that bolder moves are needed in order to assist South African homeowners struggling in the current market.

As such, Geffen urged the Monetary Policy Meeting to cut 100 full basis points.

"While ooba and South African consumers welcomed the half percent rate cut in December, further rate cuts are necessary in order to relieve homeowners and stimulate the stalling property market," said Geffen.

According to Geffen, South African homeowners are buckling under the pressure of high interest rates and are in desperate need of instant relief.

He also noted that the property market is suffering because of increasingly stricter lending criteria by South African banks. "Banks have introduced much stricter lending criteria and fewer buyers are qualifying for the full amount of the loan they apply for," said Geffen.

Ooba called for banks to reconsider their policies and relax their restrictions. "With interest rates coming down, the recovery of the property market is shifting towards bank lending policies," said Geffen. "Banks will need to relax lending in order to facilitate increased demand and prevent further price deflation."

Property analysts believe that any type of improvement in the market will be felt in the middle of the year only.