Home loan market and Interest rates at 7%
Home loan market and Interest rates at 7%
The South African Reserve Bank has cut the repo rate by 25 basis points to an all-time low of 3.5% taking the prime interest rate down to 7% - in order to give South Africans some much needed economic relief while spurring an already favorable first-time buyer's market.
The announcement was made on Thursday, 23 July. In total, the rate been cut by 300 basis points in 2020 to help consumers deal with the impact of the Covid-19 pandemic. Previously two rate cuts were announced in May added to the cuts by one percentage point on 17 March after and a 1 % cut in April.
The property sector saw a huge jump in home loan applications in June and July and with the last interest rate cut, we can expect an even higher influx of business.
From a home loan perspective, it is a particularly appealing time now to acquire a property. First-time buyers are taking advantage of cheaper finance to buy more expensive properties.
The majority of the activity in the market appears to be focused on a specific price band with applications in the R750 000 to R2 million price band being very popular.
In terms of interest rates offered by the different financial institutions, the average rate offered by the banks has increased by 0.15% year on year for the 2ndquarter of this year. This means that the banks are offering fewer bonds at below prime rate than before and therefore it is imperative for any buyer to ensure that you have a top negotiator at your side when applying for bond finance.
Apart from pent-up demand as a result of the lockdown, home buyers are responding well, not only to the significantly reduced interest rates but also to the opportunity to capitalize on the zero transfer duty payable on properties selling for up to R1 million. As a result, Capcubed reports that home loans extended to first-time buyers remained elevated at around 70% in June.
Here's what you can expect to save and pay per month on the following bond values after the latest interest rate drop:-
|
Bond value |
Saving after 0.25% rate cut |
Monthly Payment after 0.25% cut on 24 July |
Total saving in 2020 after 3% cut |
|
R1 000 000 |
R151 |
R7 752 |
R1 898 |
|
R1 500 000 |
R226 |
R11 629 |
R2 846 |
|
R2 000 000 |
R302 |
R15 505 |
R3 795 |
|
R3 000 000 |
R453 |
R23 258 |
R5 692 |
We help people own homes and to protect their biggest asset
Contact us for assistance
Amelia Cochrane Regional Home Loans Manager Capcubed Finance 083 408 0226 amelia@capcubed.com