How much more you will pay on your bond after the latest interest rate hike

For most homeowners with bonds, the interest rate hike announced by the Reserve Bank on Thursday (18 November) will mean paying extra on their monthly repayments.

While economists were largely split on the possibility of a hike ahead of the announcement, the decision to hike the repo rate by 25 basis points to 3.75% (base home loan rate to 7.25%) will be a ‘shock’ to the economy says Samuel Seeff, chairman of the Seeff Property Group.

“The SARB should have waited until next year. We are disappointed at the hawkish stance, especially since inflation has remained flat for the second month. I am of the firm view that the SARB should be taking a more aggressive approach to supporting the economy as central banks have done globally,” he said.

While the economy has surprised on the upside, Seeff said the post-pandemic recovery needs more support and that consumers need the reprieve and extra disposable cash as the country heads into the traditionally busy festive season for the retail sector.

Given the hike, the table below outlines what South Africans will now be paying on their monthly bonds, based on a 20-year loan.

Bullish market 

Marcél du Toit, chief executive of estate agency Leadhome, said that the 25 basis point increase in the repo rate, announced by the SARB today will have ‘little effect’ on a bullish South African residential property market, as the prime interest rate is still significantly lower than it was than 12-18 months ago.

“The property market is in an extremely positive place right now. According to our book, October sales were up more than 50% October 2021 versus October 2020, and over the same period the average number of days taken to sell a home reduced from 84 days to 48 days.

“Positively, November has seen the momentum continue with buyer activity up 15% month on month from October to November.”

Du Toit added that the activity in the big metros is pretty much back to pre-Covid levels, and banks are still lending aggressively, with average bonds in October 0.2% below prime.

“The sentiment from the market is upbeat, and we’re seeing renewed confidence in property as a long-term investment and a vehicle to building wealth. People clearly feel more secure in their jobs and their incomes, and as business has become more sustainable, it’s removed the ‘fear factor’ from investing.”

The market

Pam Golding’s Residential Property Index shows that national house price inflation has eased from a peak of +5.3% in May to +4.7% in October 2021.

The Western Cape is once again bucking the national trend, with house price inflation remaining elevated at +6.6% in recent months, while house price inflation has slowed to 4.2% in both KwaZulu-Natal and Gauteng in October 2021, the group said.

In South Africa’s major metro housing markets, house prices are up as follows:

• Nelson Mandela Bay’s house price growth of 7.1% in July 2021 continues to lead across the metros;
• Ekurhuleni, in second, continues to accelerate reaching +6.6% in October;
• Cape Town, which was the last major metro housing market to recover, continues to rebound to 5%;
• House price inflation in eThekwini (5.4%), Tshwane (4.5%) and Johannesburg (3.8%) is stabilising.

“While there remain variances in activity and demand across various regions, cities and towns depending on the movement of homeowners and the respective affordability of property and desirability of each location, Pam Golding Properties reports sustained volumes of sales transactions nationally, underlining ongoing consumer confidence in homeownership,” Pam Golding said.

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Read: SA Reserve Bank hikes rates