Although the cut in rates will reduce monthly mortgage commitments, Standard Bank says higher administrative and home servicing costs, such as rates and taxes, will keep clients under pressure.<\/p>\n\n\n\n
The interest rate hiking cycle started in November 2021, driven primarily by the COVID pandemic, local energy issues and volatile food and oil prices.<\/p>\n\n\n\n
Consumers with a R1 million bond on their hones would have seen their interest rate repayments increase by roughly R4,000 per month today\u2014a 40% increase in instalments since November 2021. <\/p>\n\n\n\n
Although rates are predicted to edge lower in September, the benefits to customers could <\/p>\n\n\n\n
\u201cDespite rates predicted to edge lower, benefits to customers might take a bit longer to filter through. Since November 2021, the price of electricity has increased by an average of almost 30%, or 23% above inflation,” said Thabani Ndwandwe, chief risk officer at Standard Bank SA. <\/p>\n\n\n\n
“This added more pressure on households struggling to balance household finances.” <\/p>\n\n\n\n
That said, after the first 25 basis point rate cut, homeowners can expect to save R208 per month or R2,500 per year on their repayments for a bond worth R1 million. <\/p>\n\n\n\n
If the rate cuts expected in the first half of 2025 cut an additional 50 basis points, homeowners could pay R625 less per month for an R1 million property in a year\u2019s time. <\/p>\n\n\n\n
With R1.2 trillion in mortgages in South Africa, a 50 basis point cut will free up over R4 billion going towards instalments per annum. <\/p>\n\n\n\n
“The relief will go a long way in softening the blow caused by the increase in monthly property servicing costs like rates and taxes,” said Standard Bank.<\/p>\n\n\n\n
“In cities such as Johannesburg, electricity tariffs increased by 12.7% on 1 July, while property rates increased by 3.8%. Tariffs for refuse collection, water and sanitation have also increased at a pace that has outstripped inflation.” <\/p>\n\n\n\n
In addition to these increases, the City of Johannesburg\u2019s prepaid electricity customers will receive an additional R200.00 fixed charge every month, even if local political developments could stop this. <\/a><\/p>\n\n\n\n Prior to these increases, South Africa’s property sector was already struggling from the increased cost of living. <\/p>\n\n\n\n Ooba Home Loans\u2019 latest barometer showed that the number of new home loan applications in Q1 2024 was 9% lower than in Q1 2023 and 25% behind Q1 2022. <\/p>\n\n\n\n \u201cA reduction in interest rate should lead to a recovery of home loan application volumes, which had already started rowing by 8% since the last quarter of 2023. However, this growth will likely be muted by municipal tariff hikes,\u201d said Ndwandwe.<\/p>\n\n\n
![\"\"](\"https:\/\/businesstech.co.za\/news\/wp-content\/uploads\/2024\/07\/Thabani-Ndwandwe-1-1024x681.jpg\")
<\/a>