Raised interest rate affords consumers little breathing space
Prime lending rate rises to 10.50%
Homeowners have been dealt another blow after the SA Reserve Bank announced yesterday that it will raise interest rates for the seventh consecutive time.
Reserve Bank governor Lesetja Kganyago spoilt the festive season mood when he announced in the last monetary policy committee meeting of the year that he was raising the repo rate – the rate at which the Reserve Bank lends to commercial banks – by 75 basis points to 7% per annum effective from November 25.
This saw the prime lending rate – the rate at which commercial banks lend to consumers – increasing to 10.50%.
This effectively means that Kganyago has raised the interest rates by 3.5% since last year November, something which did not go down well with many debt-ridden consumers.
Accountant Themba Mvula, who bought a R437,000 house in Protea Glen in Soweto in 2017, said he was disappointed.
Mvula has fixed his home loan interest rates for three years until next year. When Mvula bought the house, he was paying R5,400 a month until 2020.
“After I renewed my fixed interest rates contract in 2020, I have been paying R4,700 per month,” he said.
The 37-year-old married father of three was worried that when he renews the fixed interest rate contract of his home loan next year, the bank was going to charge him a higher rate due to the interest rates rising cycle.
“I have decided to always fix my home loan interest rates because that puts me in a position in which I will, more often than not, be able to predict how much I will pay for my bond. I am trying to avoid a sitAnother uation in which the Reserve Bank would raise the rates sharply to an extent that I will not be able to afford my bond repayment and fall back on monthly instalments until my house is repossessed,” he said.
homeowner, Sello Moloto, who has two houses in Lyndhurst, Johannesburg, costing R560,000 and R900,000, also expressed disappointment.
Moloto, a bank employee who benefits from lower interest rates due to his employment, said when the interest rates were low during the Covid-19 lockdown he was paying R2,300 a month for the R560,000 home loan.
“I am now paying R2,600 for the home loan.”
“Whatever the interest is, for us bank employees our rates are prime minus 2.5%. I bought my second property in March 2021 for R900,000 and I was paying R5,600 a month.
“However, since the interest rates have been experiencing a sharp increase, I am now paying R6,300.” He, however, complained that the higher interest rates were impacting his life negatively.
“Over the past couple of years, we have seen both the prices of goods and services rising drastically while my salary has been rising by 3% below inflation. This means there are many things I have had to cut like groceries, in order to stay afloat,” he said.