Despite economic turbulence in South Africa, the repo rate has remained two basis points lower than it was before the pandemic\u2019s onset in March 2020. This, combined with high approval rates amongst the banks, has created favourable home loan lending conditions for buyers.<\/p>\n
However, savvy buyers are always looking for further opportunities to maximise their return on investment and have turned to home loan interest rates as an avenue to reduce costs.<\/p>\n
The latest statistics by Ooba Group reveal that the average interest rate achieved for its customers was prime less 0.21% and further indicated that second-time homebuyers (who put down deposits) were enjoying further rate discounts.<\/p>\n
\u201cPreferential interest rates such as these can be achieved by \u2018priming\u2019 one\u2019s financial profile prior to applying for a home loan,\u201d said Rhys Dyer, CEO of Ooba Group.<\/p>\n
Home loan interest rates explained<\/strong><\/p>\n \u201cIn the case of home loans, different customers receive different interest rates based on their individual financial risk profile. It all depends on what the bank is willing to offer, and how much of a risk they consider you to be,\u201d Dyer said.<\/p>\n \u201cIf you are deemed a low financial risk, the banks may offer you an interest rate below prime \u2013 known as a preferential interest rate.\u201d<\/p>\n Homebuyers need to decide between a fixed or a variable interest rate on their loan. Dyer believes that this choice comes down to preference and a buyer\u2019s appetite for risk: \u201cWith variable interest rates, when the prime interest rate goes down, so do your monthly home loan repayments and vice-versa.<\/p>\n “With fixed interest rates, you keep paying the same monthly repayment amount regardless of market factors such as the increase or decrease of the prime interest rate. However, if you go for this option, you\u2019re likely to be charged a higher amount from the get-go and won\u2019t benefit from rates decreasing.”<\/p>\n Ultimately, a buyer\u2019s interest rate is determined by their ability to prove their financial stability to the banks, and one of the most effective ways to do this is by getting prequalified before applying.<\/p>\n A chance to fix weak spots before applying<\/strong><\/p>\n Prequalification is a certificate that buyers can obtain using a free bond indicator tool or by speaking to a home loan expert. Dyer said that \u201cprequalification plays a vital role in boosting your chances of receiving preferential interest rates because it helps to your \u2018prime\u2019 your financial profile before the banks assess your application.\u201d<\/p>\n \u201cThe prequalification process acts as a preview of what you will go through when applying to the banks, but with lower stakes. It gives you a realistic insight into your financial status by assessing your credit score and affordability. It will also reveal any problem areas or weak spots that may need improving prior to applying for a home loan,” he said.<\/p>\n Dyer cautions that leaving these weak spots unchecked decreases your chances of receiving preferential interest rates.<\/p>\n Further tips to achieve a better interest rate on your home loan<\/strong><\/p>\n Dyer shares additional his top tips to lower your financial risk profile and achieve the best possible interest rate on a home loan:<\/p>\n\n
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