SARB interest rate hike impact on home loan repayments

The South African Reserve Bank’s (SARB’s) interest rate hike has increased the repo rate by a further 75 basis points to 7% and will raise the prime rate equivalently.

It marks the sixth increase in the prime lending rate this year – pinning the interest rate at 10.5%.

Rhys Dyer, CEO of ooba Group, said the interest rate hike would dampen the residential property market and further strain consumers.

“The silver lining is that it appears that progress is being made in containing inflation both locally and globally,” he said.

The interest rate increase will have significant financial implications for consumers who have to repay home loans.

Samuel Seeff, chairman of the Seeff Property Group, said the outlook for the property market remains stable despite the interest rate hike.

Seeff said the property market has remained healthy and generally outperformed world markets over the last few months.

“Despite following world patterns, we have not experienced the dramatic highs and lows and consequent shocks,” he said.

“Our interest rate is still below the 20-year average whereas the US rates have tripled, resulting in drastic hikes in house payments.”

“Transaction volumes have come down as the market corrected due to the interest rate hikes, but we may still end the year slightly ahead of the 2019 pre-pandemic levels.”

Seeff said the biggest impact of the hikes has been on the lower price bands and first-time buyers.

The upper price bands are generally less sensitive to rate hikes and more to the general economic conditions.

The outlook for 2023 looks stable, with the Western Cape likely to be the top performer, boosted by semigration and the return of international buyers.

Inland areas may see more pressure on sales volumes and prices.

Interest rate hike impact on home loan repayments

Due to the interest rate hike, home loan repayments over twenty years at the prime rate will increase as follows.