Attention Tokai homeowners and house hunters! Last week’s news about the interest rate hike came as a bit of a surprise to a majority of the experts and commentators. Herewith the implications in a nutshell:
- Prime has gone from 9.5% to 9.75%.
- Existing homeowners with bonds: an increase of about R17 a month per R100 000 of their bond value – or R131 on a bond of R800 000 (the average bond value in SA according to BetterLife Home Loans).
- Prospective first-time buyers: household income requirement for the average first-time loan will rise by some R350 a month now to around R19 420.
- Banks’ lending criteria: will tighten further on net surplus income to ensure leeway for debt repayment in the face of increasing costs of food, medical and utility costs, and the installments on cars, credit cards and other debts.
- Affect on the real estate market: buying activity may start to slow down somewhat now, especially among first-time buyers who are the most credit dependent.
What should you do? Save for a bigger cash deposit which will assist loan qualification and also help to reduce home loan installments.
Get pre-qualified! Look at your finances in the cold light of day so you know what you can afford before you fall in love with a new home.