Interest Rates Expected To Rise - Time To Budget For Higher Bond Repayments
The MPC's expected hike of the repo rate on 19 May 2022, to 4.75%, will bring the prime rate to 8.25%.
On a home loan of R1 million over a 20 year period, the bond repayment will increase from R8 209,49 p.m. (at the present 7,75%) to R8 520,66 - an monthly increase of R311,17.
South Africans have during the last 2 years enjoyed record-low interest rates. We are however moving into a cycle of interest rate hikes and the South African Reserve Bank's Monetary Policy Committee (MPC) is expected to hike interest rates further during May.
Homeowners are advised to start budgeting ahead of the announcement to make sure they can afford the potential increase.
At the previous MPC meeting, two members preferred a 50 basis point rise in the repo rate while three were in favour of the 25 basis point increase.
CCH's online calculators can help homeowners work out the possible repayments on a home loan: https://www.cch.co.za/calculators/#bond-transfer-costs
We therefore recommend all existing and future property owners to establishing what the impact will be on your monthly budget and to start planning (if necessary) to find the additional funds to afford the higher repayment amount if the interest rates do indeed increase. It can be the difference between being financially secure or possibly falling behind on home loan repayments.
Unless your home loan's interest rate charges is fixed, your disposable income will shrink with every interest rate hike. You also need to take into consideration that the repayments on all other debts will also increase should interest rates climb at the next MPC meeting.