Double blow for people who own homes in South Africa

South African homeowners are set to be hit with rising repayments on their mortgages and increased insurance costs as severe storms hit the country. 

Rising fuel prices amid disruptions to oil supply from the Middle East are likely to translate into interest rate hikes at the next two Reserve Bank Monetary Policy Committee meetings. 

This means the rising prices of petrol and diesel will not only increase the cost of filling up, but also the cost of debt on home loans, car loans, and credit cards. 

The average home loan repayment on a R2 million house in South Africa is expected to rise by R672 per month after the two interest rate hikes. 

This will significantly impact consumer spending and economic growth in South Africa, with an increasing share of disposable income going towards debt repayments instead of purchasing goods and services. 

Another blow to homeowners is coming in the form of unexpected floods and severe storms, which are increasing the cost of insurance for homes and possessions. 

Several South African provinces have been hit with severe storm warnings in recent weeks, which points to of changing weather patterns that increase the cost of coverage for insurers. 

Old Mutual Insure’s head of risk intelligence and engineering, Caesar Balona, explained that the “new normal” of severe weather has led to a fundamental shift in risk exposure. 

“Extreme weather events such as floods, hailstorms, wildfires, and prolonged droughts are increasing in both frequency and intensity, significantly elevating risk for clients,” Balona said.

This means that even properties within the same suburb may carry different risk profiles, depending on factors such as elevation, drainage, proximity to water sources, or exposure to fire-prone areas.

Balona said that while insurance coverage is necessary and a vital step, it does not replace the need for homeowners to be proactive in risk management. 

Risk management reduces the potential for damage before it occurs, minimises claims outcomes, and helps protect the property. 

Balona said this means that safeguarding a home or assets is a shared responsibility between the insurer and policyholder. 

Simple actions can save millions

Much of the proactive risk management is relatively simple, requiring only minor tweaks to better protect a home from the worst effects of storms and other natural disasters. 

For example, ensuring that water can flow away from the property, keeping gutters clear, and identifying areas where water may pool during heavy rainfall can help reduce the likelihood of storm damage.

“I often suggest that homeowners observe their property during a heavy downpour. Through this exercise, it quickly becomes clear where vulnerabilities exist, whether it is poor drainage or blocked outlets,” Balona said.

However, an increasing issue for homeowners is collective infrastructure, which has deteriorated significantly across South Africa in recent years. 

Amid increased municipal mismanagement and maintenance deficiencies, community infrastructure has become a major challenge for insurers. 

The failure of infrastructure exacerbates the impact of severe weather events, resulting in millions of rands in additional claims. 

“A blocked stormwater drain or culvert in the surrounding area can have a direct impact on your home. Engaging with community structures to address these issues is an important part of managing risk collectively,” Balona said. 

Recent trends, such as the widespread installation of solar panels and backup power systems, have further increased the value and complexity of many homes.

“These additions are valuable, but they also introduce new risk considerations. Solar panels, for example, are exposed to weather-related damage such as hail, and may require specific cover,” Balona said.

He also emphasised the importance of regularly reviewing insurance policies to ensure that cover remains aligned with the home’s actual value and risk profile.

“Underinsurance remains a significant concern. If your home and its contents are not insured for their correct replacement value, you may face shortfalls at the claim stage,” Balona warned.

Compliance and proper installation are equally important, particularly with newer technologies. Ensuring that all documentation and certifications are in place can help avoid complications should a claim arise.

For prospective homeowners, climate risk is increasingly becoming an important factor in property purchase decisions.