The pendulum has swung following a season of record-low interest rates, moving the country into a cycle of interest rate hikes.
Set to meet again in May, the MPC may choose to hike interest rates further. Homeowners are advised to evaluate their finances ahead of the announcement to make sure they can afford the potential increase.
At the previous MPC meeting, two members preferred a 50 basis point rise in the repo rate while three were in favour of the 25 basis point increase.
To play it safe, Adrian Goslett, regional director and CEO of RE/MAX of Southern Africa, recommends that homeowners check what their monthly repayments would be if interest rates were to rise by 50 basis points at the next meeting.
“There are various online calculators that can help homeowners work out the possible repayments on a home loan. BetterBond, for example, has a repayment calculator that helps homeowners work out what their repayments will be depending on the size of their home loan and their given interest rate,” Goslett explained.
Equipped with this information, homeowners can then examine their budgets to find the necessary funds to afford the higher repayment amount if interest rates do indeed increase.
“Being well prepared in this regard can mean the difference between being financially secure or falling behind on repayments,” said Goslett.
In addition to this, Goslett warned that, unless the accompanying interest rate charges are fixed, the repayments on other debt will also increase, should interest rates climb at the next MPC meeting.
“The disposable income for those who carry other forms of debt will shrink with every interest rate hike. My advice, especially for those who are paying off a home loan, is to funnel extra cash towards other debt repayments ahead of the coming announcement,” he said.
Elaborating on this, Goslett explained that when deciding what debt to settle first, it is advisable to go for the debt with the highest interest rate charge.
“Things such as a car loan or personal loan will often carry higher interest rate charges than a home loan, and it might make sense to pay off these debts as soon as possible,” Goslett suggested.
However, everyone’s situation is unique. Those who would like advice specific to their circumstances are encouraged to speak to a professional financial advisor.
Those who are unable to keep up with repayments on their home loan should speak to a real estate professional about other available options.
“Moving to a smaller, more affordable home might relieve the financial pressure and create a less stressful home environment. You will never know what is available unless you start searching. Having a reliable real estate expert while you are searching can also make the experience less stressful. For those who are feeling the financial pressure, I recommend speaking to the professionals before things get out of hand,” Goslett concluded.
