Interest rate hike: Good news for homeowners and buyers

Despite today’s interest rate hike, homeowners and buyers do have some good things to look forward to. Picture: Cottonbro Studio/Pexels

Despite today’s interest rate hike, homeowners and buyers do have some good things to look forward to. Picture: Cottonbro Studio/Pexels

Published Jan 28, 2023


It was pretty much a given that the South African Reserve Bank would increase the repo rate this afternoon, but with the hike being 0.25%, there is little for homeowners and property buyers to be really bitter about.

Experts predicted that the best-case scenario would be a 0.25% increase and the worst-case a 0.75% raise, leaving many people holding out for a 0.5% rise as a compromise.

So when the announcement was made, there were undoubtedly many people breathing a sigh of relief.

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While a rate hike is never welcome news, Samuel Seeff, chairman of the Seeff Property Group says that, because it was expected, it was largely factored in by the property market. Still, he feels that the Bank could have actually kept the rate steady as a reprieve to the economy and consumers, especially considering the escalating Eskom energy crisis.

He hopes to see the rate coming down towards the latter part of the year.

Understandably, says Tony Clarke, managing director of the Rawson Property Group, people are feeling the ever-increasing pinch of this recent series of hikes, but, in the long run, not increasing them will be more harmful.

“A potential hold on the rate could follow in May and July, with the latter part of the year seeing another 0.5% increase in total. Looking even further ahead – if current hikes have the desired effect – we could start seeing reductions in the latter part of 2024.”

While there is no doubt that the higher interest rate will weigh on the market and result in “slightly fewer” buyers, Seeff’s assessment is that the market will remain stable and still see “good activity”.

“People always need a roof over their heads, lifestyle needs change, and for a variety of other reasons, we will continue seeing demand in the market. We are also likely to continue seeing strong migration to the coastal areas, especially in view of the growing service delivery challenges and Eskom energy crisis.

“We are still seeing strong support from the banks with mortgage lending remaining favourable for the market. Buyers should therefore not hesitate to get into the market, but must now factor in the higher costs.”

Furthermore, asking prices will increasingly come under pressure, and sellers will need to heed the advice of local agents if they want to take advantage of the demand in the market, he says.

But while homeowners may be justifiably concerned over the potential impact on their property values, Clark says the reality is not nearly as dire as popular opinion would have them think.

“There are a lot of myths and misconceptions doing the rounds on the property market at the moment and a lot of them are easy to believe because they tie into our biggest fears as property owners, buyers, and sellers.

Instead of falling prey to panic, however, he encourages homeowners to separate fact from fiction – preferably with the help of a property expert – before making any decisions that might backfire in the long run.

Adrian Goslett, regional director and chief executive of RE/MAX of Southern Africa, advises homeowners and future buyers to prepare themselves for the worst-case scenario of having interest rates climb by roughly 1% over the course of the year.

“It is better to make room in your budget now than to be caught short if interest rates do climb further.”

He adds that the effects of these interest rate hikes are already becoming more evident.

“The total number of registered transactions lessened during the last quarter of 2022. Following this latest interest rate hike, it is likely that the property market will quieten down somewhat further over the course of the year.”

In addition, Goslett notes that the effects of any interest rate hike can only really be felt a month or two after the announcement once homeowners adjust to the higher debt repayments.

“Any impact caused by the rising interest rates is therefore likely to be gradual and unlikely to cause any form of housing market crisis. That being said, I do foresee that the property market will be less active this year than it has been in previous years. Homeowners will need to price the home fairly and partner with a reliable real estate professional to ensure they sell for full value.”

The good news, says Carl Coetzee, chief executive of BetterBond, is that the country could be heading for the peak of this current cycle of interest rate hikes.

“So we could see interest rates start to stabilise in the coming months, and hopefully even drop towards the end of this year and into next year.”

It’s important to take the long view when it comes to the housing market and buying property.

“Our Reserve Bank acted swiftly to curb inflation by starting to increase interest rates in November 2021 already. That’s why we think today’s increase may be one of the last hikes for a while.”

If that proves to be the case, he says it will give homeowners some welcome breathing room as they grapple with food, fuel and electricity costs, and load shedding.

“It could also create more opportunities for new buyers to enter the housing market by investing in homes of their own in the near future. And that would be good news for our economy too.”

Andrew Golding, chief executive of the Pam Golding Property group, also hopes that the country has reached the peak of the interest rate cycle. For the housing market, however, he says activity remains steady across all sectors, buoyed by favourable bank lending as well as cash buyers – particularly in the luxury market. Sought-after nodes also continue to experience high demand.

Citing ooba statistics, he says: “Encouragingly, banks remain competitive with the average concession relative to prime declining to -0.8% in December, which is the most competitive rate available to local homeowners since the final months of the global financial crisis in 2007/08.

“Furthermore, while 100% bond applications have slowed, applications for loans exceeding 100% of purchase price have risen from 1.3% in mid-2021 to 3.5% by December 2022.”

Rhys Dyer, chief executive for ooba Home Loans also believes that this “moderate increase” is one of the last rate hikes that we will experience this year. Current and potential homeowners can now possibly breathe a small sigh of relief.

“With the exception of a possible single small additional rate hike this year, I believe that we are now out of the woods, and that South Africans can start to plan around the interest rate of 10.75% to 11%.

“We also believe that this stabilisation will allow more buyers to better budget their monthly repayments, knowing that we are at the peak of the interest rate cycle...”

Echoing this, Chris Tyson, founder and chairperson of Tyson Properties, says the interest rate hike is “extremely positive” and that while it may inject a little caution, it will not frighten buyers out of the market.

“In fact, we see this as extremely positive. It is a sign that interest rates are levelling off to be in line with pre-Covid levels.”

Nick Pearson, chief executive of Tyson Properties, believes there has been a correction in interest rates over the past year and that this latest increase – “which is likely to be one of or even the last in this cycle” – will enable both buyers and sellers to readjust to a post pandemic economy.

“An interest rate hike definitely forces people to be more correct when it comes to pricing their properties for sale or making an offer on a property.”

He does state though, that the interest rate increase will affect different parts of the market differently, with wealthier buyers more likely to weather the increased cost of home loan repayments. In addition, different provinces are also likely to respond differently.”

Now that you know where interest rates are headed, start your search for a property to call your own at IOL Property.