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All signs point to yet another interest rate hike, with some even predicting a bump of 75 basis points, as the MPC is meeting again later this month.
ALSO READ: Interest rates climb even further
Experts advise South Africans to prepare – ahead of the July meetingv – to avoid falling behind on debt repayments.
According to Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, existing homeowners and buyers should check what 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 R1m home loan taken over 20 years, the repayments will grow by over R1 000 if the interest rate reaches pre-pandemic levels of around 10%.
As expected, the amount will grow the higher the loan amount is. For example, on a R2m home loan taken over 20 years, the repayment amount could grow by over R2 000.
“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 afford, even if interest rates climb further,” said Goslett.
Goslett added 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.
While the real estate market has not yet been affected by the series of interest rate hikes, Goslett advises real estate professionals to set aside some savings in case market activity slows.
“In any commission-based career, it is advisable to have cash reserves to get you through the slower months.
“Regardless of the external circumstances, it is always good to ensure that you carry six-month cash reserves. If you’re not there yet, then I would strongly recommend that you start building towards it,” he said.
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