Are you a homeowner, or prospective homeowner?
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The latest hike in interest rates will impact homeowners and those thinking of purchasing property with a home loan. During a recent interview with Tygerberg Radio, Seeff Hermanus Licensee Paul Kruger shed some light on the increase and what it means for homeowners, as well as insights to alleviate financial pressure and make informed decisions.
Interest rates increased by 75 basis points, which brought the prime lending rate to a high of 9.0%. Keep in mind that this spike is from an all-time low point - the lowest recorded in the last 47 years. This low-interest rate was a direct result of the government's strategy to stimulate the economy during the pandemic.
Despite the recent spike, we are still below the average prime lending rate of 10.75% since 2006. Paul Kruger believes that this increase won't be a surprise for South Africans, but will nonetheless have serious consequences and is not good news for homeowners.
The increase in food prices, fuel - which in the past year increased by over 30%, electricity tariffs and persisting load shedding, coupled with the increase in interest rates will place enormous strain on consumers and homeowners.
Homeowners with bonds can expect to pay an extra R400 to R620 on their monthly repayment, for every million on their bond. A further knock is the newest inflation figures, spiking to 7.4% in June. This is the first time since 2009 that inflation rises above 7%.
Hermanus Licensee Paul Kruger offers the following advice for homeowners:
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Do not make rash decisions. Great haste often makes waste.
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The property market fluctuates in cycles, and we are currently experiencing the upward curve in interest rates.
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If it's difficult to service bond repayments, make timely arrangements with your bank. Banks do not want your home, so make arrangements with them promptly.
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If you have an extra flat or room, consider leasing it to assist in making bond repayments.
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If you need to sell due to financial pressure, ensure your property is listed at a realistic market-related price. Property that is priced right sells like hotcakes.
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First-time buyers need to be careful with their calculations when considering taking out a home loan. Be conservative in your financial planning, and make calculations on a worst-case scenario rather than a best-case scenario. In other words, do your calculations on repayments at a rate of between 10% and 11%.
When is a good time to buy property?
Whether it's a good time to buy depends on the individual's situation. For those residing in the Western Cape, the best time to buy would be yesterday. The semigration of buyers to the Western Cape won't decline for the foreseeable future, and along with it, the high demand for a suitable property at the right price will continue.
Although it is a seller's market at the moment, it's reaching a plateau as it's coming to its peak, which can provide more attractive opportunities for buyers. Regardless of it being a seller's market, we are still under double figures in terms of the prime lending rate and there are sure to be excellent opportunities for buyers in all price ranges.
Author: Ruché Ten Have
