Climate for property purchases remains positive

In 2020, South Africans saw a historic series of cuts to the repo rate that resulted in a prime interest rate of just 7% - a rate not seen since the 1970s. While the repo rate has now been lifted by 25 basis points to 3.75%, the time to buy property is still now. The repo rate and the prime lending rate work hand in hand, with the latter now sitting at 7.25%, which is still a rate far lower than others seen in recent years. Jawitz Properties takes a look at the financial implications of the altered lending rates for homeowners, ways to secure the best possible interest rate and reasons why now is a great time to invest in property.

Altered home loan instalments

The good news is that while there will be a change to your monthly home loan instalment, the increase will be negligible and becoming a homeowner is still extremely affordable. Home loan originator ooba has crunched the numbers and reveals that no matter what the value of your bond is, the increase is very affordable.

According to ooba's data, a home loan of R1 000 000 would have cost R7 753 per month at an interest rate of 7%. At 7.25%, the monthly instalment will be around R7 904 per month - an increase of just R151. If you're considering buying property in this price bracket, it's worth remembering that all properties under the R1 000 000 mark are currently exempted from transfer duties.

If your bond amount is R1 500 000, the interest rate increase will see you paying just over R200 per month more. At an interest rate of 7%, you'd have been paying approximately R11 629 per month, while the increase will see your payment adjusted to R11 856.

As a third example, let's consider a bond amount of R3 000 000. Since July 2020, you'll have been paying approximately R23 259 per month. The slight increase to 7.25% will see your monthly premium rise to R23 711 - a difference of just R452 per month.

Ways to secure the best possible interest rate

Despite the fluctuation of the repo rate, the interest rate that you are given when you buy a property will also depend on other factors and there are various ways to ensure that you get the best possible deal. For starters, the larger the deposit you have saved up, the more the bank will see you as a safe investment. Another important step is to use a bond originator when you apply for your home loan, as they will approach all the banks on your behalf to get the best possible deal. The better your credit rating is, the better the home loan interest rate you are likely to get. You can therefore start preparing for the journey of homeownership years in advance by paying off as much debt as possible and proving that you are financially responsible.

Other positive factors at play

The COVID-19 pandemic has had a remarkable impact on consumer behaviour and as banks compete for their share of the home loan market, they have a healthy appetite for risk. This means higher approval rates and lower interest rates for home loan applicants. While the local interest rate has increased slightly, it is still an ideal time to invest in property. A high percentage of home loans for first-time buyers are being accepted, as well as 100% home loan applications. In a nutshell, the time to buy property remains now.

Help is at hand for all those looking to take advantage of the low interest rate and other prevailing positive conditions. Contact Jawitz Properties if you're interested in buying property - whether to live in or to rent out - and we will help you every step of the way from finding the property to securing your home loan.