Following the latest interest rate cut, purchasing real estate has never been more enticing. At the current prime lending rate of just 7%, homeowners can end up spending less on their monthly bond instalments than they would in rent.
“Not only does this cut make it more affordable for buyers to enter the market, but it also makes it easier for existing homeowners to keep up with their monthly repayments. This is beneficial to everyone as it will hopefully reduce the amount of homes that will have to be repossessed and sold at public auction, which safeguards against further downward pressure on asking prices,” explains Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
To get an idea on how much a homeowner stands to save on their existing home loan, Goslett recommends that homeowners use BetterBond’s Additional Payment Calculator that can be found on their website. Based on this calculator, if homeowners kept their bond repayments on a R1 million home loan at the same amount as they were when interest rates were at 9.75%, they will save R304,000 on interest and shorten the loan by 6.25 years at the current 7%.
The table below provides a few more examples of what homeowners stand to save following the interest rate cuts:
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| Monthly Bond Instalment |
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| ||||
| Bond amount | 9,75% | 8,75% | 7,75% | 7,25% | 7,00% | Monthly Saving from 9,75% to 7% | Interest Saving Over 20 Years from 9,75% to 7% |
| R 250 000,00 | R2 371 | R2 209 | R2 052 | R1 976 | R1 938 | R433 | R103 931 |
| R 500 000,00 | R4 743 | R4 419 | R4 105 | R3 952 | R3 876 | R867 | R207 861 |
| R 750 000,00 | R7 114 | R6 628 | R6 157 | R5 928 | R5 815 | R1 299 | R311 792 |
| R 1 000 000,00 | R9 485 | R8 837 | R8 209 | R7 904 | R7 753 | R1 732 | R415 723 |
| R 1 250 000,00 | R11 856 | R11 046 | R10 262 | R9 880 | R9 691 | R2 165 | R519 654 |
| R 1 500 000,00 | R14 228 | R13 256 | R12 314 | R11 856 | R11 629 | R2 599 | R623 585 |
| R 2 000 000,00 | R18 970 | R17 674 | R16 419 | R15 808 | R15 506 | R3 464 | R831 446 |
| R 3 000 000,00 | R28 456 | R26 511 | R24 628 | R23 711 | R23 259 | R5 197 | R1 247 169 |
| R 4 000 000,00 | R37 941 | R35 348 | R32 838 | R31 615 | R31 012 | R6 929 | R1 662 892 |
| R 5 000 000,00 | R47 426 | R44 186 | R41 047 | R39 519 | R38 765 | R8 661 | R2 078 615 |
| R 6 000 000,00 | R56 911 | R53 023 | R49 257 | R47 423 | R46 518 | R10 393 | R2 494 338
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“For those who can afford to do so, there really has never been a better time to enter the market than right now. I would just advise buyers to leave room in their budget for if and when the interest rates return to pre-lockdown levels. For existing homeowners, if it is within their budget, I would recommend keeping the repayment as it was before the cut. This is one of the best ways to save money and, if you have an access bond, it is also a great way to have access to emergency funds if you later come to need them,” Goslett concludes.
