News alert, interest rate increased by 0.25% making the new prime lending rate 10.50%

News alert, interest rate increased by 0.25% making the new prime lending rate 10.50%

 On 28 May the South African reserve Bank increase the repo rate with 25 basis points resulting that the prime lending rate increased to 10.50% making it the first-interest rate hike in several years.  While this might seem like a small increase, it has a direct impact on the cost of borrowing money from the consumers and especially homeowners with a variable rate home loan.

For example, a home loan of R1 million could approximately increase between R150-R200 per month and a home loan of R2 million could increase between R300 and R400 per month “Please note these increases will vary, depending on the current clients interest rate that they received from the bank and what amount is still payable from the bond that is an estimate”

What impact does this have on homeowners?

Existing homeowners will not only have the bond increased with their monthly repayment, but many household items are also facing pressure due to high fuel prices, living costs and interest rate might place additional pressure on most household budgets. I encourage homeowners to please look at the finances and reduce unnecessary debt where possible and budget accordingly on months that they might expect higher expenditures.

Impact on property buyers

I’ve had several discussions yesterday with, colleagues in the industry, and we have come to the consensus that this higher interest rate hike will definitely place certain pressure on potential buyers before making a decision. So prospective buyers might be delaying purchase decisions while assessing the impact on borrowing costs.

However, buyers that are interested in purchasing properties would have to pre-qualify themselves to make sure what they qualify for, and it is in my opinion that more serious buyers will be in the market looking for properties. 

Impact on property sellers

Usually, with any interest rate, there is a surplus of stock coming into the market. It is a vital importance that Property Practitioners and sellers do correct pricing on the homes before placing it onto the market to make sure that the property will achieve a successful sale in the current market environment and that the price is market related.

Silver lining

Although higher interest rates can slow the demand in the short term, they implement a control of inflation and protect long-term economic stability in South Africa, a stable, inflation, environment, support, sustainable property, market and growth for the country looking ahead. The South African Reserve Bank has indicated that interest rate hike decisions will depend on economic conditions and inflation, trends, fuel prices, and what’s going on in the global environment.

For buyers, sellers, and property investors, understanding the market conditions is important, seeking professional property advice remains even more important than ever. Contact one of our local Property Practitioner at Apple Property for any advice that you would need. 

Property remains one of the most effective long-term investments in my opinion and you will always have a return on investment if you buy the property at a market related price.

Andre Sciocatti 

Director / Principal