Property

How much more you are paying for your bond compared to 2 years ago

Staff Writer

 ·30 Oct 2022

The current base home loan rate sits at 9.75% after the recent interest rate hike of 75 basis points by the South African Reserve Bank (SARB) on 22 September 2022.

Rising interest rates and global inflation have meant homeowners and consumers have had to tighten their belts and look to save money where they can, as fuel prices and mortgages sharply increased throughout 2022.

Managing director of the Rawson Property Group, Tony Clarke, said that homeowners would start feeling the pinch as their bond repayments continue to climb alongside the rest of their everyday expenses.

He added that some would have tough decisions ahead, and most households have very few luxuries left to cut back.

Samuel Seeff, the group chairman of Seeff Property, said the current prime lending rate of 9.75% is effectively back to pre-Covid levels. Still, stability is now vital for the economy and market.

In terms of the impact of the hiking cycle on the property market, Seeff said it is beginning to see a two-paced market emerge. While demand is still high on the one side, buyer hesitancy is increasing, with deals taking much longer on the other side.

In contrast, two years ago, when the Covid-19 pandemic hit, economies worldwide came to a standstill as people were required to stay at home, forcing businesses such as shopping centres, work offices, and recreational facilities to close.

In response to the economic slowdown, the SARB reduced interest rates to offer South Africans financial relief and encourage spending in the economy with an attractive prime leading rate.

As a result of the cuts in interest rates in 2020, the lowest prime leading rate was seen in July, which meant the base home loan rate was 7%.

Adrian Goslett, the regional chief executive of RE/MAX, says that while interest rates are beginning to resemble pre-pandemic levels, long-term homeowners will be accustomed to rates at these highs – but there are concerns for first-time home buyers.

He said these first-time homeowners who bought property during the favourable period in 2020 might not be aware their bonds are expected to become much more expensive.

“My concern is around the many first-time home buyers who entered the market when interest rates were at an all-time low and who might be unfamiliar with the fact that interest rates often change over a twenty-year loan term.

For these homeowners, I would encourage them to do the necessary repayment calculations to ensure they can afford the higher repayments, which are expected to increase in the near term,” said Goslett.

The table below shows how much more you are paying for your bond repayments today compared to 2020.