Use repo rate decision to plan ahead

You may be thinking that 2019 will be the year where you can seriously look at property in Mpumalanga, and after the recent revelation that the interest rate will not be changed, things are looking on the up. If you have been reading the updates on the Private Property website, you will no doubt see that there is optimism about what lies ahead, but there are also warnings to keep level headed.

The interest rate was changed slightly last year, and this came on top of numerous price increases that made 2018 a tough financial year. However, in January the news that the Reserve Bank Monetary Policy Committee had decided to keep the repo rate at 6.75% (prime lending rate at 10.25%) was celebrated.

However, before you plot various ways to splash out the cash that you will be keeping, property experts suggest that you should consider making that money work for you while times are good. One of the options presented is to save 0.25% of your instalment on a monthly basis. This way, if the repo rate changes further down the line, you won’t have to stress about taking on the extra cost.

An alternative to this is to make the payment of that amount directly into your home loan. Sure, this may not have a major impact on the instalment if the repo rate does change, but what it can do is shave off months on your repayment terms.

Regional Director and CEO of RE/MAX of Southern Africa, Adrian Goslett, discusses this option further, using a property worth R1.5m as an example, saying, “By putting in just an extra R300 per month towards your bond, the repayment period would be shortened by over a year, saving you R130,000 – enough to buy an entry-level car. Putting in an extra R500 per month would shorten the repayment period by two years and save you around R200,000.”