Homeowners will do well to prepare for a possible interest rate hike by budgeting for higher bond repayments. Picture: Mikhail Nilov/Pexels
As much as South Africans are praying for the South African Reserve Bank to keep the repo rate unchanged next month, arguing that inflation is still within the target range, there is a very high possibility that it will go up.
If it does, an increase of 0.25 percent seems likely, although it may not be a bad thing to budget for a 0.5 percent hike, just to be safe.
If you are paying off a R1 million home loan, your monthly bond repayment is currently about R10,837 a month at the current prime lending rate of 11.75 percent. Should the interest rate go up to 12 percent, your monthly repayment will be about R11,011. This means you will need to find an extra R174.
While predictions have not yet touched on the rate increasing by 0.5 percent, if it does, you will have to fork out an extra R349 a month on a R1m bond repayment as the monthly repayment will climb to R11,186.
Of course, the higher the value of your home loan, the more any interest rate increase will affect your pocket.
Here is an idea of what you can expect if the interest rate is hiked on November 23:
– R1,25m home loan
Your current monthly repayment is about R13,546, but if the interest rate increases by 0.25 percent, your new amount due will be approximately R13,764. This is R218 more than you are paying now. If the rate increases by 0.5 percent, you will owe about R13,982 a month, which is an increase of R436.
– R1,5m home loan
Your current monthly repayment is about R16,256, but if the interest rate increases by 0.25 percent, your new amount due will be approximately R16,516. This is R260 more than you are paying now. If the rate increases by 0.5 percent, you will owe about R16,778 a month, which is an increase of R522.
– R1,75m home loan
Your current monthly repayment is R18,965, but if the interest rate increases by 0.25 percent, your new amount due will be R19,269. This is R304 more than you are paying now. If the rate increases by 0.5 percent, you will owe R19,575 a month, which is an increase of R610.
– R2m home loan
Your current monthly repayment is about R21,674, but if the interest rate increases by 0.25 percent, your new amount due will be approximately R22,022. This is R348 more than you are paying now. If the rate increases by 0.5 percent, you will owe about R22,371 a month, which is an increase of R697.
– R2,25m home loan
Your current monthly repayment is about R24,383, but if the interest rate increases by 0.25 percent, your new amount due will be approximately R24,774. This is R391 more than you are paying now. If the rate increases by 0.5 percent, you will owe about R25,168 a month, which is an increase of R785.
– R2,5m home loan
Your current monthly repayment is about R27,093, but if the interest rate increases by 0.25 percent, your new amount due will be approximately R27,527. This is R434 more than you are paying now. If the rate increases by 0.5 percent, you will owe about R27,964 a month, which is an increase of R871.
– R2,75m home loan
Your current monthly repayment is about R29,802, but if the interest rate increases by 0.25 percent, your new amount due will be approximately R30,280. This is R478 more than you are paying now. If the rate increases by 0.5 percent, you will owe about R30,761 a month, which is an increase of R959.
– R3m home loan
Your current monthly repayment is about R32,511, but if the interest rate increases by 0.25 percent, your new amount due will be approximately R33,033. This is R522 more than you are paying now. If the rate increases by 0.5 percent, you will owe about R33,557 a month, which is an increase of R1,046.
– R3,5m home loan
Your current monthly repayment is about R37,930, but if the interest rate increases by 0.25 percent, your new amount due will be approximately R38,538. This is R608 more than you are paying now. If the rate increases by 0.5 percent, you will owe about R39,150 a month, which is an increase of R1,220.
– R4m home loan
Your current monthly repayment is about R43,348, but if the interest rate increases by 0.25 percent, your new amount due will be approximately R44,043. This is R695 more than you are paying now. If the rate increases by 0.5 percent, you will owe about R44,743 a month, which is an increase of R1,395.
– R5m home loan
Your current monthly repayment is about R54,185, but if the interest rate increases by 0.25 percent, your new amount due will be approximately R55,054. This is R869 more than you are paying now. If the rate increases by 0.5 percent, you will owe about R55,928 a month, which is an increase of R1,743.
– R8m home loan
Your current monthly repayment is about R86,697, but if the interest rate increases by 0.25 percent, your new amount due will be approximately R88,087. This is R1,390 more than you are paying now. If the rate increases by 0.5 percent, you will owe about R89,485 a month, which is an increase of R2,788.
– R10m home loan
Your current monthly repayment is about R108,371, but if the interest rate increases by 0.25 percent, your new amount due will be approximately R110,109. This is R1,738 more than you are paying now. If the rate increases by 0.5 percent, you will owe about R111,856 a month, which is an increase of R3,485.
If you are worrying about how to find the extra money to pay the higher bond repayments should the interest rate be hiked, here are some ways you can use your home to pay for itself.
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