Rising Repo Rates

by Nishta Jhurree

March 2022

On Wednesday 9th of March 2022, the Monetary Policy Committee (MPC) of the Bank of Mauritius (BoM) has decided to raise the Key Repo Rate (KRR) from 1.85% to 2% per annum. Mention was made about the war between Russia and Ukraine that has added a new layer of uncertainty to the global growth outlook.

The KRR / Interest rates play a major role in property cycles, and for this reason it is important for potential home buyers to keep an eye on interest rates and its fluctuations.

When interest rates are on the rise, prospective home buyers may be more reluctant commit to loan finances to enter the property market. Demand for properties falls since less people are looking to buy and consequently the value of real estate may stagnate or decline.

The inverse also applies. Lower interest rates encourage prospective home buyers to enter the property market. This increase in demand for property may lead to a rise in property values since homes are snapped quickly therefore becoming more difficult to obtain.

However, interest rates are not the only factor that helps to determine the cost and difficulty of purchasing real estate. Other factors ranging from location to population trends can also impact home prices and availability.

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