R51,000 blow for homeowners in South Africa

 ·5 Jun 2024

It’s been a whole year since the South African Reserve Bank (SARB) hiked interest rates to 15-year highs, and this has cost the average homeowner an estimated R4,247 per month or R50,964 over the past year in interest on their bond repayments.

The South African Reserve Bank’s (SARB’s) Monetary Policy Committee has voted to hold rates, keeping the repo rate at 8.25% and the prime lending rate at 11.75%.

The decision was unanimous. Since the start of the rate hike cycle in November 2021, rates have been hiked by 475bps to the highest levels in 15 years.

Interest rates have been on hold at this level since the last policy rate decision a year ago, maintaining the financial pressures on households that have also had to absorb other hikes, such as electricity, fuel, and property rates.

According to Lightstone’s data for the first quarter of 2024, the average property value in South Africa stood at R1,377,014.

This means those who bought a house at this value at the start of the hike cycle at 7% (prime September 2021) have been paying an extra R4,247 per month on their bond repayments at 11.75% (prime since May 2023).

This works out to an extra R50,964 over the past year (May 2023 to May 2024).

However, this increases with the price of the home, as those who bought an R2 million house pay R6,168 extra per month, while the few who purchased an R5 million house pay a whopping R15,420 per month.

These work out to an extra R74,016 and R185,040, respectively, since May 2023.

The table below highlights how much extra it costs to finance a bond at the current interest rate compared to September 2021, before the rate hike cycle started, and its accumulation over the past year.

ValueSept 2021 (7%)May 2024 (11.75%)ChangeSince May 2023
R750,000R5,815R8,128+R2 313+R27 756
R800,000R6,202R8,670+R2,468+R29 616
R850,000R6,590R9,212+R2,622+R31 464
R900,000R6,978R9,753+R2,775+R33 300
R950,000R7,365R10,295+R2,930+R35 160
R1,000,000R7,753R10,837+R3,084+R37 008
R1,500,000R11,629R16,256+R4,627+R55 524
R2,000,000R15,506R21,674+R6,168+R74 016
R2,500,000R19,382R27,093+R7,711+R92 532
R3,000,000R23,259R32,511+R9,252+R111 024
R3,500,000R27,135R37,930+R10,795+R129 540
R4,000,000R31,012R43,348+R12,336+R148 032
R4,500,000R34,888R48,767+R13,879+R166 548
R5,000,000R38,765R54,185+R15,420+R185 040

Several property experts have called the unanimous decision to hold interest rates as disappointing but expected.

However, what wasn’t expected was Reserve Bank Governor Lesetja Kganyago’s strong indication that the repo rate probably wouldn’t come down at all this year, pointing instead the second quarter of 2025.

Lew Geffen Sotheby’s International Realty CEO Yael Geffen said citizens of South Africa will ultimately be the losers if the MPC keeps moving the goalposts.

The chairman of the Seeff Property Group, Samuel Seeff, echoed Geffen’s sentiment.

The interest rate has been too high for too long, negatively impacting the economy and property market, he said.

“The stance of the Reserve Bank has been too hawkish. While inflation has moderated, the reality is that keeping the interest rate so high for so long has done little to bring down inflation, largely as it is not demand-driven but rather ‘imported’ into the economy,” he said.

Seeff added that the high interest rate had stymied the economy instead of bringing down inflation.

“The debt servicing burden on consumers and homeowners has spiked, and living costs have spiked, while salary hikes have been moderate.,” he said.

Standard Bank also recently signalled concern that the level of home loan distress is rising.

Read: New shopping mall opens in R6 billion precinct – in South Africa’s capital

Show comments
Subscribe to our daily newsletter