Although homeowners will have to pay a bit more on their monthly bond repayments after Thursday’s repo rate rise of 25 basis points, the good news is that we could be heading for the peak of this current cycle of interest rate hikes.
The move brings the repo rate to 7.25%, and the prime rate (interest rate) to 10.75%. The SA Reserve Bank hiked rates by 75 basis points for three meetings in a row last year, and it is now above pre-pandemic levels.
READ MORE: Interest rates back at pre-pandemic levels
That means interest rates should start to stabilise in the coming months, and hopefully even drop towards the end of this year and into next year.
Experts agree it’s important to take the long view when it comes to the housing market and buying property.
The South African Reserve Bank acted swiftly to curb inflation by starting to increase interest rates in November 2021 already. That’s why there is general consensus that Thursday’s increase may be one of the last hikes for a while.
Bradd Bendall, Head of Sales, at BetterBond says if that proves to be the case, it will give homeowners some welcome breathing room as they grapple with food, fuel and electricity costs, and have to live with loadshedding.
”It could also create more opportunities for new buyers to enter the housing market by investing in homes of their own in the near future. And that would be good news for our economy too.”
On a R2 million bond, homeowners will now pay R337 more each month to pay off their bond.
The interest rate is not all bad news, as savers will now get more return on their cash savings.
FNB is also of the view that this rate-hiking cycle may be coming to an end. CEO Jacques Celliers agrees higher interest rates have been of significant benefit to consumers who receive income from cash savings instruments.
Loadshedding has, however, resulted in additional unplanned expenses for households and businesses that are striving to stay afloat amid the disruptions.
“The recently announced double-digit increase in electricity costs will put further strain on households and businesses, especially SME’s. Despite these challenges, we also believe that adversity tends to inspire innovation and new growth opportunities. In this regard, we are really encouraged by the efforts of individuals and businesses that continue to explore prospects in alternative energy sources like solar. We reiterate our commitment to supporting these initiatives through our individual and commercial client lines of business.”
Lew Geffen Sotheby’s International Realty CEO Yael Geffen says the repo rate hike is yet another blow to South Africans, whose salaries are dropping while cost-of-living increases spiral out of control.
“The economy is going to continue to take a battering until the government acts decisively to end the country’s power crisis, which is one of the main reasons the Reserve Bank has again slashed the growth forecast to a measly 0.3% for this year.
“People simply aren’t coping. While average salaries fell 6.9% across the country last year, on a new home loan of R2 million at the prime rate, since November 2021 monthly mortgage repayments have rocketed R4 800.”
Geffen says sectors of the property industry will feel the impact of the hike in the first half 2023.
“Many buyers are likely to hang on until later in the year when forecasts say the repo rate will peak at 7.5%, and with any luck we may even see a rate cut before December.”
