The latest interest rate hike may feel like the final nail in the coffin for many homeowners already battling to make their bond repayments, but the end does not need to be nigh; you do not need to lose your home.
Homeowners in this position are encouraged to approach their financial institutions as soon as possible to find a way out of potential distress.
They should also, if possible, find ways to reduce their expenses in order to “avoid, at all costs”, being forced to sell or even defaulting, says Herschel Jawitz, chief executive of Jawitz Properties
“This is not an ideal environment to sell a property under pressure, especially if you have a large bond relative to the market value of your home.”
Yesterday’s announcement that the interest rate would increase by 0.5% was unexpected for many owners, and higher bond repayments were probably not in most of their budgets. For this reason, Adrian Goslett, chief executive of RE/MAX of Southern Africa also states that those who finds themselves pinched by higher bond instalments should speak to their financial institutions “before it is too late”. They can also explore the option of downscaling if this will relieve the financial pressure.
“The last thing you want is to ruin your credit score or, much worse still, have your home repossessed by the bank.”
Rhys Dyer, chief executive of ooba Home Loans, offers these tips to existing homeowners:
1. Renegotiate your home loan repayment term with your bank
For instance, if you initially applied for a home loan over 20 years, you can request that the home loan term be reset back to 20 years or even extended over a longer period of up to 30 years.
2. Renegotiate the interest rate on your home loan
An existing homeowner can approach their bank to renegotiate the interest rate that they are currently being charged on their home loan, he says.
3. Take advantage of First Home Finance.
“Existing homeowners who meet the criteria but have never previously applied or received the subsidy, are still eligible to receive it retrospectively, provided that the application is made within 12 months of bond registration.”
4. Cash-in on the rental demand
If all else fails, homeowners can downscale, or move in with family members or friends and rent out your home to cover your expenses.
“There is a big demand for rentals at the moment so it’s a good time to capitalise on this.”
Goslett also encourages real estate professionals to be “mindful of the current circumstances” and “remain sensitive” to the fact that things might be tight for some homeowners following yesterday’s announcement.
“Now more so than ever before, it is important to act as a trusted advisor to your clients and to be respectful of their circumstances. It might be a sensitive topic for many homeowners, so avoid being too pushy or aggressive in your marketing strategies or you might end up losing more clients than you will gain,” he says.
Property experts have expressed their disappointment with the latest rate hike, although some did acknowledge that the South African Reserve Bank was left with little choice. Lew Geffen Sotheby’s International Realty chief executive Yael Geffen, however, believes the decision was “dismaying”.
“As a nation we are in the highest food inflation cycle in since 2009, we’re at the highest prime lending rate since 2009, and if the economy continues to shrink as it did in the latter part of 2022, we’re going to be in a recession.
“The Reserve Bank has to give us some slack. Nobody is getting salary increases that can accommodate [thousands of Rands) of monthly mortgage repayment hikes in 18 months, which is the case for every household in the country right now servicing a R2 million bond.
“The situation is untenable; people are going to lose their homes and their livelihoods.”
She also advises sellers to be realistic about pricing in the current market.
“The buyers are out there, but in uncertain times they’re less inclined to take risks. They’re looking for solid investments that’ll deliver in the long term, and sellers who offer that are going to close the deals.”
IOL BUSINESS