What the rising repo rate means for your home loan

Like many South Africans across the country, property owners are feeling a pinch in their wallets. The repo rate has risen once more and numerous blood pressures with it. We take a look at how you can fit your expenses comfortably within your budget with just a few minor adjustments. 

 

 

Whenever the South African Reserve Bank hikes its prime lending rates, the rate at which clients need to pay the loan back increases. The rate can fluctuate or be steady for long periods of time depending on the strength of the economy. Your monthly repayments are now set at a 7,75% repo rate in 2023. This means setting aside more cash to allow for your loan to be repaid, emergency situations, travel expenses, luxuries, household maintenance and other life essentials. 

 

The average salary cannot support constant rises in the repo rate and it is in your best interest to plan for the unexpected in advance. Magda Stoffberg, Master Property Practitioner at RealGlen Properties says, "It is an interesting fact that the interest rate in 2003 was 15.5%. People who bought properties then survived all the interest hikes, and their properties will be paid off this year." 

 

 

South Africans who rely heavily on financed assets such as cars and homes will be greatly impacted by the repo rate increase. Considering that many people often have more than one loan to pay off, the pressure continues to mount and the debt starts adding up. As a whole, this has a negative domino effect on the rest of the country. It disables the spending power of the average citizen as they are barely making ends meet and not investing enough back into the economy. 

 

To keep up, many without wise financial backgrounds or out of desperation turn to more lenders and banks as an option to stay afloat. Taking out loans to pay off debt only incurs more debt in the long run as the repo rate rises. 

 

 

Banks and all authorised financing and lending authorities make a profit off the interest rate at which they lend money. Therefore, once the repo rate increases their profit margin grows larger without having to invest more money in their business or change their structure. Private accredited financial institutions can reap the rewards of turning over a considerable amount of profit in this instance. It is the responsibility of the South African Reserve Bank to keep our economy stable and hold commercial banks accountable for accurate accounting practices with each of its customers. It is beneficial to every lending institution that the repo rate increases, however, it can also motivate those who have loans to pay it off quicker than the agreed-upon date with lump sums, as this means they won't have to pay any further repo rate increases. 

 

 

The repo rate affects the daily lives of every citizen who has a loan to pay off. As a property owner, this can be stressful. Calculating the cost of your bond, maintenance and more can result in you falling short of spending money on enjoying life. Fortunately, there are ways to make extra money online and from your passions. If you're creative consider taking up your skill for painting, woodwork, graphic design, flower arranging, or more for a fee. Similarly, if your organisational skills are up there with the Marie Kondos' of the world, consider becoming a closet organiser, part-time personal assistant, or party planner! These jobs can easily be done in your spare time and will provide you with peace of mind when paying off your loan. 

 

 

RealGlen Properties specialises in the best real estate, accompanied by expert financial advice from our team of property practitioners. You can decide to take a home loan with confidence, with the knowledge that we have your best interests at heart. Pun intended! Our listed properties are quality, high-end investments that are always in demand should you need to sell. Contact us for more information today. 

Author REALGLEN Properties