Good news: Homeowners may only have 4 months left of higher bond repayments

Homeowners can expect some reprieve in their bond repayments. Picture: Ketut Subiyanto/Pexels

Homeowners can expect some reprieve in their bond repayments. Picture: Ketut Subiyanto/Pexels

Published Sep 5, 2023


Homeowners can probably breathe another sigh of relief as the interest rate is not expected to increase this month.

South Africa’s annual headline inflation declined again in July, which bodes well for a positive rates decision at the end of September.

While there has been some concern that the rising fuel price could force the South African Reserve Bank (SARB) to hike the rate, economists don’t believe this to be the case.

Property experts agree that the repo rate should remain steady at 8.25 percent, which will keep the interest rate at 11.75 percent.

Carl Coetzee, chief executive of BetterBond, says South Africa follows international trends, and that the central banks of other emerging markets have been holding off on repo rate increases to give consumers some financial reprieve.

“It is likely that South Africa will follow suit as inflation recently eased to a two-year low of 4.7 percent. It is therefore hoped that the repo rate will start to drop again in 2024, if not sooner.”

Echoing this, Richard Gray, chief executive of Harcourts SA, says: “I think rates will remain constant and stay the same. The next move will be down early next year. We still see strong bank lending and South Africans want to own properties as opposed to rent, so demand is strong.”

Although fuel price increases will have an impact on inflation, Coetzee says it is unlikely that the Reserve Bank will hike interest rates at this stage, explaining that inflation could still be within the 3 percent to 6 percent target range by the end of the year.

Angelika Goliger, chief economist at EY Africa, says inflation within the target range provides room for the central bank to continue keeping the repo rate on hold at 8.25 percent in the upcoming meeting.

Even if the repo rate does hold steady until the end of 2023, Coetzee believes homeowners will have to “hold on” for a few months before they can expect to see a drop in their monthly bond repayments.

“But, this also means that homeowners will only have four more payments at the current prime lending rate of 11.75 percent, if interest rates drop from January 2024.”

The other good news, says Adrian Goslett, regional director and chief executive of RE/MAX of Southern Africa, is that buying a home when interest rates are high will give you a better chance of securing one at a good price. There will obviously be challenges to buying in such an environment but, on the up side, there tends to be far less competition among buyers when interest rates are high.

This means that sellers are more likely to accept offers below the asking price, especially if there is no interest from other qualified buyers.

Coetzee also reminds first-time buyers that, by working with a bond originator, it is possible to secure a lower interest rate, called a rate concession. As an example, he says BetterBond’s average interest rate concession when applying to four banks is currently 0.61 percent.

“This means that the interest payable on your bond will be 0.61 percent below the current prime lending rate of 11.75 percent. On a R2 million bond, this monthly repayment at prime minus 0.61 percent – or at 11.14 percent – would result in a monthly saving of R839.”

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