How the repo rate will affect your home loan
The South African Reserve Bank's recent hike of the repo rate has made financing a home more expensive than ever. The increase is a total of 75 basis points, which means you will now be paying an overall of 8.25% on the interest rate. We take a look at how these fluctuations will affect the market (and your bank account) going forward.
Real estate got real
The property market saw a dip during the Covid-19 pandemic, however, sales and rentals steadily increased as restrictions were lifted. The trend of semigration also influenced the market, as many jobs became remote and home offices became the new norm. With the majority of people spending more time in their homes than ever, many became serious first-time home buyers.
Having the finances to purchase a home is an achievement on its own. Making the necessary steps toward securing your home loan and building proper credit with banks is essential to a successful financial agreement.
Reasons for an increase
With the rising cost of fuel and food, these external factors contribute to families and working professionals having to adjust their budgets accordingly. The weakened economy, electricity crisis and a drop in other sectors affecting small business growth, tourism and more have contributed to this rise. So what does it mean for your monthly payments and how can you stay afloat while the water rises?
While the bank's lending criteria will get stricter it will offer new homeowners the chance to get pre-qualified as there will be a shorter list of applicants due to affordability reasons. Strong candidates with impeccable credit scores will have the upper hand in securing a loan quicker. Having a bond originator that calculates your payments is an added bonus that will seal the deal when buying a new home. Banks will still be eager to extend home loans during times of rising interest rates as many homes will be on the market with competitive listing prices. According to ooba home loans, you can secure lower interest rates by applying to multiple lending banks.
Property is still a good investment
The one certainty is that homes for sale and let will always be in demand. People will always need a place to live, work and put down roots in communities. Regardless of the repo rate, the affordability of property ownership is largely based on personal finances in any economic climate.
When you purchase a home and your bond is registered, you can make the decision between a fixed-rate or a variable-rate loan. With fixed rates, you will continue to pay the initial amount monthly until the agreed time period is up. Once this term expires you have the option to either discuss a new fixed rate period with your bank or change to a variable rate.
Fixed rates will guarantee you a better ability to budget and gain control over any unforeseen financial situations and manage the cost of living. While this repo rate hike means adjusting the way we look at spending on other aspects of life, RealGlen Properties has a range of properties for every price range. Whether you're looking for a home in an estate or a popular city, we provide all the tools and resources you need to confidently make the move into owning property as easy as can be. Contact us today.