The Monetary Policy Committee (MPC) is set to meet again later this month and all signs point to yet another interest rate hike, with some even predicting a bump of 75 basis points. Experts advise South Africans to prepare themselves ahead of the July meeting to avoi.d falling behind on debt repayments
According to Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa, existing homeowners and buyers alike should check what their repayments will be at various interest rate levels. They can do so by using the repayment calculator on BetterBond’s website.
For example, on a R1 million home loan taken over 20 years, the repayments will grow by over R1000 if the interest rate were to reach pre-pandemic levels of around 10%.
|Repayment||R8 521||R8 678||R8 837||R8 997||R9 159||R9 321||R9 485||R9 650|
As expected, the amount grows the higher the loan amount is. For example, on a R2 million home loan taken over 20 years, the repayment amount could grow by over R2000.
“Equipped with this knowledge, existing homeowners can work out where to cut back to afford the higher repayments. For buyers, preparing a table like this can ensure that they purchase a home that they can truly afford even if interest rates climb further,” says Goslett.
Goslett adds that landlords who are still paying off a home loan on the rental property might also decide to increase the rental amount to make up for the higher bond repayments. Tenants are, therefore, advised to leave room in their budgets for rental escalations over the coming months.
“Regardless of the external circumstances, it is always good to ensure that you carry 6-month cash reserves. If you’re not there yet, then I would strongly recommend that you start building towards it,” he concludes.