How much more you’ll pay on your monthly bond in South Africa after the latest interest rate hike

The South African Reserve Bank (SARB) has announced a 50 basis point hike, taking the current prime lending rate from 10.75% to 11.25%.

This recent hike marks the ninth rate hike since the current hike cycle started in November 2021, totalling 425 basis points over the period.

Rates are now at their highest point in 13 years (June 2009), when the fallout from the global financial crisis weighed on the local currency.

The rate hike was higher than market expectations, with most economists and analysts anticipating a 25bp hike.

“Economic and financial conditions are expected to remain more volatile for the foreseeable future. In this uncertain environment, monetary policy decisions will continue to be data-dependent and sensitive to the balance of risks to the outlook,” said Reserve Bank governor Lesetja Kganyago.

Chairman of Seeff Property Group, Samuel Seeff, said the property market is mindful that the SARB faced a difficult decision.

“The Eskom energy crisis, weak business confidence, deterioration of the CPI inflation to 7% in February (from 6.9% in January), and pressure on the currency left little room to manoeuvre,” he said.

However, he added that the 50bps hike is a bit steep, and the higher interest rate will affect buyers and homeowners. It will result in higher repayments of home loans and other credit and put further pressure on the cost of living and disposable income.

Nonetheless, the hike was largely expected and already factored in by the market.

“While not ideal, the rate is still below the historical average of the last 20-30 years, and we are still seeing a strong, stable property market,” said Seeff.

“The impact of the higher interest rate is somewhat mitigated by the continued favourable bank lending climate, which is still the best in over a decade. The increased transfer duty exemption threshold to R1.1 million is also a positive for buyers,” he added.

Seeff expects business as usual for now, noting that the monthly transfers are still slightly ahead of the pre-pandemic levels.

According to Herschel Jawitz, CEO Jawitz Properties, the rate hike will undoubtedly put pressure on homeowners, but he said the risks of allowing inflation to persist at high levels is far greater.

“The rationale behind the decision by the Monetary Policy Committee far outweighs the risks posed by sustained high inflation. With inflation at 7%, there are very few sectors of the local residential market that are delivering inflation-beating growth in property prices,” he said.

Jawits noted that, on average, property prices are expected to increase this year by 2.75% to 3.5%, which means that in real terms, after inflation, property prices are declining by a similar amount.

“As long as inflation remains high amid low economic growth, real property price growth will remain marginal,” he said.

The table below shows how much more you pay for your bond repayments from today (30 March) compared to the last hike.