20 July 2023

The South African Reserve Bank's monetary policy committee, has elected to keep the repo rate unchanged at 8.25% and the Prime lending rate is 11.75%. This relieves South Africa’s already embattled consumers, who are facing skyrocketing costs across the board. 

"Inflation has slowed over the course of May and June to fall within the upper limits of the SARB’s inflation target for the first time in over a year,"  says Leonard Kondowe, Finance Manager for Rawson Finance. However, global inflation and the weak rand also play an important role in the MPC’s interest rate decisions.  “As such, it’s unlikely that we will see monetary policies easing until things are looking more positive on these critical fronts. That could take some time, judging by current conditions," says Kondowe.

Advice for homeowners

For South African homeowners, this means a potentially long road ahead.

“Bond repayments have risen faster on previous rate hikes which have been higher than anyone expected, and salaries haven’t come close to matching those changes” says Kondowe, “That has put a lot of homeowners under unexpected – and growing – financial pressure. My best advice, under the circumstances, is to focus on reducing unnecessary spending, avoid taking on new debt, and follow a strict monthly budget.”

Where simple budgeting will not suffice, Kondowe recommends approaching home loan providers to discuss debt restructuring options.

“Lenders are very open to compromises that will help protect their investments,” he says. “Don’t be shy to approach them and discuss options. At best, you’ll find a mutually beneficial solution. At worst, you’ll walk away with a better idea of what your next steps should be.”

Advice for sellers

Those who need or want to sell a property in the current market will need to play their cards wisely.

“There are definitely buyers out there – we’re helping them get prequalified and approved for finance all the time,” says Kondowe, “but the market is competitive and sellers need to be smart about pricing and marketing their properties professionally.”

Advice for prospective buyers

As for buyers, Kondowe says lenders are hungry for qualified bond applicants, competing against one another to secure new clients. That said, finance offers are not quite as favourable as they have been, with the majority of offers falling at or just below prime.

“As always, the stronger your financial profile and larger your deposit is, the better your offer is likely to be,” he says. “It is possible to secure a bond of 100% to 105%, but this is seldom the best financial decision. If it was me, I’d err on the side of affordability to future-proof my investment, making sure my monthly repayments were at least one or two percent below my maximum affordability.”