At a glance: Should you fix your home loan rate?
- Fixed rate: stable repayments for a set period (often up to 5 years) — useful if you need certainty.
- Variable rate: repayments can move up or down with the rate cycle — you benefit from cuts, but carry hike risk.
- Fixed rates can cost more upfront: they’re often priced with future expectations in mind.
- Your deal is personal: your credit profile, affordability, and repayment track record influence your rate.
Quick checklist before you decide
- Stress-test your budget: could you absorb a rate increase without strain?
- Compare scenarios: run a bond calculator for today’s rate vs a higher “what-if” rate.
- Consider extra payments: paying above the minimum reduces capital faster and cuts long-term interest.
- Negotiate: a bond originator can compare offers and pursue rate concessions across banks.
MyProperty Home Loans tip: If you’re unsure, compare real-world fixed vs variable options (and fees) before locking in.
Homeowners and prospective home buyers often consider fixing the interest rate on their home loans, and with inflation concerns, rising living costs, and an upcoming repo rate announcement, this has once again become a key talking point.
Fixing your interest rate means you know exactly what you will pay on your bond each month, regardless of where we are in the interest rate cycle. While this can offer certainty and peace of mind, it is not always the right choice for everyone.
Unfortunately, there is no simple, one-size-fits-all answer. Each homeowner’s financial situation is different, and choosing between a fixed or variable rate requires careful consideration to ensure the decision supports long-term affordability and financial stability.
When applying for a home loan, interest rates are usually offered on a variable basis. Once your bond has been registered, you may apply to fix your interest rate for a limited period, subject to bank approval and a time-bound offer. However, before making this decision, it’s important to understand how interest rates work and how changes can affect your repayments.
Repo rate versus prime lending rate
To make an informed decision, it helps to understand two key financial terms:
- Repo rate: This is the interest rate set by the South African Reserve Bank and represents the rate at which commercial banks borrow money from the central bank.
- Prime lending rate: This is the rate banks charge consumers, which includes additional costs and risk factors.
- Your home loan rate: The actual rate you receive depends on factors such as your credit profile, affordability, repayment history, and the bank’s lending criteria.
Currently, the prime lending rate sits at 10.25%. Any change to the repo rate typically results in an adjustment to the prime lending rate, which directly affects homeowners on variable-rate home loans. Even a small rate change can have a noticeable impact on monthly bond repayments over time.
Fixed vs. variable interest rates: pros and cons
Factor
Fixed Interest Rate
Variable Interest Rate
Predictability
Monthly repayments stay the same for the fixed period
Repayments move up or down as interest rates change
Cost
Often higher upfront
Usually lower initially
Flexibility
Fixed for a defined period, typically up to five years
No lock-in period
Risk exposure
Protected from rate increases, but won’t benefit from rate cuts
Benefits from rate cuts but exposed to increases
If you already have a variable interest rate on your home loan, paying more than the minimum repayment whenever possible can be a valuable strategy. Extra payments help reduce the outstanding capital balance, lower total interest paid over time, and build equity in your home.
Should financial pressure arise in the future, the equity built up in your bond may allow you to approach the bank to refinance or renegotiate your loan, an option that is far more limited if repayments have only ever been made at the minimum level.
Key considerations before fixing your rate
1. Loan term
Fixed interest rates are generally available for periods of up to five years. On a long-term home loan, this means you will need to renegotiate your interest rate once the fixed period ends, potentially at less favourable terms.
2. Loan repayment period
The longer your bond term, the greater the impact interest rate changes will have on your monthly repayments. Small increases can add up significantly over time.
3. Rate concessions
Bond originators can approach multiple banks on your behalf to negotiate better interest rates. By leveraging competition between lenders, services such as MyProperty Home Loans can help secure rate concessions that may not be available when applying directly.
4. Timing and affordability
Fixing your interest rate is less about predicting the next repo move and more about ensuring your repayments remain affordable under different scenarios. Fixed rates are typically priced with future expectations in mind, meaning they may already account for anticipated changes.
Making the right decision
While market trends and repo rate announcements are important, your ability to comfortably afford your bond repayments should always be the deciding factor. Before choosing between a fixed or variable rate, consider the following:
- Use a bond repayment calculator to compare different rate scenarios
- Speak to a bond originator or financial professional to assess your options
- Review your household budget and ensure there is room to absorb a potential rate increase
Owning a home is a long-term financial commitment, and interest rates will inevitably change at some point during your bond term. Rather than trying to time the market, the most sustainable approach is to plan for change and choose an option that aligns with your financial goals, risk tolerance, and long-term security.
Use our home loan savings calculator to see how different rates could affect your monthly bond repayments
See how interest rate changes could affect your bond
Whether you are considering a fixed or variable rate, understanding the numbers is key. Use our home loan savings calculator to compare different scenarios and see how rate changes could impact your monthly repayments and long-term costs.
Try the savings calculator
