Cape Town - Experts have said that while Thursday’s repo rate hike of another 75 basis points by the SA Reserve Bank (SARB), was expected, it will be devastating for consumers and the effect will be even worse for mortgage holders.
The 75 basis points to 5.5%, leaving the prime lending rate at 9%, means that home buyers in the R2 million range can expect a monthly repayment hike of nearly R1000, or some R3000 since November last year.
Seeff Property Group chairperson Samuel Seeff said a home loan over 20 years at the prime/base rate will now be more expensive and gave some examples, starting with a R750 000 bond which would cost an extra R358 a month with repayment increased from R6390 to R6 748.
He said a R1 500 000 bond would go up by an extra R715 with repayments increasing from R12 781 to R13 496, while a R2 500 000 bond will cost an extra R1 191 with repayment going from R21302 to R22493.
Lew Geffen Sotheby’s International Realty chief executive Yael Geffen says a rate hike was expected, but imposing a 75 basis points increase on consumers would be devastating.
“This is the highest single rise in nearly 20 years, putting massive pressure on South Africans who are already dealing with huge increases in the basic cost of living and the previous rate hikes already imposed this year.”
She said the effect would be even worse for mortgage holders and that while estate agents always advise buyers to be financially responsible and to leave room in the budget for repo rate increases when they purchase property, increases at this level were untenable for salaried households living on fixed income.
Estate agents Harcourts SA chief executive Richard Gray said: “It is disappointing that the SARB is choosing to raise interest rates as a counter to inflation, when the real reason for the high inflation is the fuel price and not consumers overspending.”
He said that this would make it very difficult for the average South African to stay afloat.
Economic analyst Daniel Silke said that while the interest rate rises were inevitable, they were going to be extremely dangerous for the domestic economy.
He said that it came at a time when South Africa could least afford to have interest rate increases, given the sluggish nature of the economy, which is not only recovering from Covid-19 but has really been in a major slump for many years as a result of poor policy direction from the state.
Political analyst Ntsikelelo Breakfast also said the interest rate hike was going to hit all South Africans hard.
“Everyone is feeling the pinch, be they in the working class or the middle class. The middle class have a lot of financial commitments. They have got houses, car loans etc. So they’re also feeling the pinch.”