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How Will the SARB Interest Rate Hike Affect You?

Category General News

At the close of last year, just before the festive season kicked off in earnest, the South African Reserve Bank (SARB) had one last increase for residents, an increase in the repo rate from 6.5% to 6.75%. Although not entirely unexpected - many experts had predicted a hike might be on the cards if inflation did not fall - the unfortunate timing of it did put an additional financial strain on many South Africans during a time which is historically known to be hard on the pocket. Several leading figures in the property sector spoke to the effects of the hike.

Monthly instalments on home loans are set to increase by at least R16.60 per R100 000 borrowed, according to BetterBond CEO, Rudi Botha. These increases will come in the face of existing increases like school fees and medical aid subscriptions, further stretching the budget of the average South African Household. He added, "we strongly suggest that if you do get a bonus this December, you use it to reduce whatever debt you have. If you are a home-owner, for example, the best thing you can do with it is to put it straight into your bond account and reduce the capital portion of your home loan."

Stuart Manning, CEO for the Seeff Property Group, sees a slight silver-lining, "even with this hike, the interest rate is still at some of the best levels in years," and points to more pressing matters in the pipeline. "While we are looking forward to a much improved 2019, the reality is that with the General Election scheduled for May, it is likely that any uptick will only really be seen from around mid-2019. We are therefore likely to kick off 2019 on much the same foot as we are now and will need to be patient for a while longer." He continues, "conditions remain favourable for buyers who can find good value given the flat price growth and rising stock levels but don't wait too long. All economies and property markets go through cycles of ups and downs, and many will tell you if only they had bought at a particular time. While price growth has flattened, there has been no price devaluation yet, and it is still safe to invest in property."

Pam Golding Property Group CEO, Dr Andrew Golding, sees it as a potentially missed opportunity which could've helped to "stimulate economic confidence and provided some relief to consumers". But he added, "there are still inflation risks which may incline the MPC towards continuing on a modest hiking cycle in the New Year, particularly as the rand remains vulnerable to shifting investor sentiment and monetary policy tightening in the developed world. It would thus be wise for home buyers - particularly first-time purchasers - to factor this in along with the other costs associated with acquiring residential property."

Adrian Goslett, RE/MAX of Southern Africa, CEO echoed sentiments that it's consumers who are hardest hit. "The challenge now falls onto consumers who are already pinched by rising fuel costs, a weakening economy, and a month of increased expenses to keep up with the payments on their home loans and not fall behind on any other credit repayments."

Interest rate hikes seldom spell good fortune for consumers, and this latest increase is no different. Consumers need to remain vigilant with their spending and maximise their income wherever possible. This may mean renting out a room in their property or forgoing some everyday luxuries, especially during the remainder of the festive season, but the long-term gains will be well worth it.  

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Author: Berman Brothers

Submitted 17 Jan 19 / Views 712