A reprieve for South African homeowners is imminent as prospects of a rate cut were raised. Falling interest rates will help ease the burden on homeowners facing the challenges of growing administrative costs.
This comes after the cooling inflation in the country and abroad has raised prospects that the South African Reserve Bank may announce a rate cut in its next announcement on September 19.
This prediction was made by Standard Bank. The bank has also forecast two interest rate cuts by the end of the year. This will help homeowners to offload the high volume of interest rates from their shoulders.
Shot high in November 2021
Interest rates shot to the top in November 2021, resulting in many people losing their properties.
Consumers with a R1-million bond on their homes, would have seen their repayments increase by almost R4,000 a month today. And that could have been a growth of over 40% in instalments since November 2021.`
Chief risk officer at Standard Bank SA, Thabani Ndwandwe, said: “Despite rates predicted to edge lower, benefits to customers might take a bit longer to filter through. Since November 2021, electricity has increased by an average of almost 30%. Or 23% above inflation. This added more pressure on households struggling to balance household finances.”
The prime lending rate has risen 475 basis points since November 2021. This as the economy began recovering from the pandemic, and this also brought relief to consumers.
The Reserve Bank’s monetary policy committee, which decides on interest rates every two months, met on 18 July. It decided to hold the repo rate steady for the seventh consecutive time.
For a R1-million bond, homeowners can expect to save R208 per month. This on their repayments after a 25-basis points rate cut.
Decline in home loan applications
Ndwandwe said the relief would go a long way in softening the blow caused by the increase in monthly property servicing costs like rates and taxes.
Home Loans’ latest barometer showed a decline in applications. It showed that the number of new home loan applications in the first quarter of 2024 was 9% lower. This when compared to the first quarter of 2023. And 25% behind the same period in 2022.
“A reduction in interest rate should lead to a recovery home loans application volumes. These had already started …rowing by 8% since the last quarter of 2023. However, this growth will likely be muted by municipal tariff hikes,” concludes Ndwandwe.
