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Increase of Repo rate in Namibia

Posted by Admin on 27/04/2023

In its recent Monetary Policy Committee (MPC) meeting, the Bank of Namibia (BoN) announced an increase in the repo rate to 7.25% from 7%. The repo rate is the interest rate at which commercial banks borrow money from the central bank, and an increase in the rate usually leads to an increase in borrowing costs for consumers and businesses. In this article, we will discuss the impact of the repo rate increase on the Namibian real estate market.


The governor of the  (BoN) Johannes !Gawaxab said, Commercial banks do not always have to increase their lending rates whenever the repo rate goes up, but they do so at their own discretion. They do that to tame the inflation and it is a responsible decision to take.


Impact of Repo Rate Increase on Real Estate

The average home loan rate in 2021 was 8.5%, compared to 11.75% currently. For a house valued at N$1.2 million, the monthly repayments have increased by more than N$2 590 per month during the last two years.

The increase in the repo rate leads to an increase in mortgage rates and other borrowing costs, making it more difficult for individuals to afford to buy properties. This could lead to a slowdown in the Namibian real estate market, as fewer people will be able to qualify for mortgages or afford the higher monthly payments. The increase in borrowing costs may also impact property investors who may face higher interest rates on loans taken out to finance their property purchases.

The increase means more misery on most Namibian consumers, who rely heavily on debt to survive. What’s more is that as the banks increase their lending rates, they make massive profits at the expense of their customers.

We acknowledge that the interest rate we are implementing does not make the bank popular but this are necessary measures, it has many benefits, if we raise the interest rate, slow the economy, prices running out of control, its painful for our people, but if we don’t take that action, over the long time, it will be more painful. the pain will be much more deeper !Gawaxab stated.

Consequently, the repo rate increase may also affect the banking sector, as banks may find it difficult to attract deposits and maintain profitability. Banks may need to raise their interest rates on savings accounts and other deposit products to attract customers, which could lead to increased competition among banks for deposits.


The Impact of the Repo Rate Increase on the Economy

The increase in the repo rate is expected to impact the entire Namibian economy. Higher borrowing costs could lead to reduced investment in the economy, which could impact job creation and economic growth. Consumers may also reduce their spending, which could further slow down the economy.


What Can You Do?

If you are a potential home buyer or a property investor, it is important to be aware of the impact of the repo rate increase on the real estate market. You may need to adjust your budget or financial plans to account for higher borrowing costs, and you should consider speaking with a financial advisor if you are unsure how the repo rate increase will affect you.

If you are a borrower, it may be a good time to consider refinancing your loans to take advantage of lower interest rates before they increase further. Alternatively, you may want to consider paying down debt to reduce your borrowing costs over the long term.


Author: Kris Dgo

Profession: Kris is a scholar and spark interest in Real Estate, Economy, and Finance. He holds a major degree in  Marketing, Finance, and Administration.

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