How the latest SARB rate hike changes your car and home loan repayments

According to IOL, the South African Reserve Bank’s 25 basis-point increase to a prime lending rate of 10.75% takes effect immediately and raises repayments on variable-rate debt linked to prime.

What borrowers will pay more each month

According to IOL, the rise adds between R32 a month on a R250,000 car loan and about R505 a month on a R3 million home loan.

Cars

• R250,000 car: repayments increase from about R4,695 to R4,727, an extra R32 a month, according to IOL.
• R500,000 car (six years at prime): repayments rise from about R9,389 to R9,453, an extra R64 a month, according to IOL.
• R750,000 car: repayments increase from about R14,084 to R14,180, adding R95 a month, according to IOL.
• R1 million vehicle: repayments go from about R18,779 to R18,906, an extra R127 a month, according to IOL.

Home loans

• R1 million bond (20 years at prime): repayments increase from about R9,984 to R10,152, adding R168 a month, according to IOL.
• R1.5 million bond: repayments rise from about R14,976 to R15,228, an extra R253 a month, according to IOL.
• R2 million bond: repayments increase from about R19,968 to R20,305, adding R337 a month, according to IOL.
• R3 million bond: repayments go from about R29,951 to R30,457, a difference of about R505 a month, according to IOL.

Assumptions behind the numbers

According to IOL, these calculations assume 100% finance at prime, with no deposit or service charges. IOL notes that individual borrowers may pay rates above or below prime.

Long-term cost impact

According to IOL, if the higher rate remained in place for the full term it would increase the total amount repaid.

• R500,000 car over six years: total repayment would be about R680,600 at 10.75%, compared with about R676,000 at 10.5% an increase of about R4,600, according to IOL.
• R1.5 million home loan over 20 years: at 10.75% the loan would cost about R3.65 million including roughly R2.15 million in interest; at 10.5% it would cost about R3.59 million including about R2.09 million in interest. According to IOL, the quarter-percentage-point difference would add about R60,700 to the cost of the bond.

What experts said

IOL quoted economists reacting to the Reserve Bank’s unanimous decision. PSG senior economist Johann Els said,

“I expected the decision to be close, with a strong case for a rate hike. However, the fact that it was unanimous was more hawkish than I expected.”

Standard Bank Group head of South Africa Macroeconomic Research Dr Elna Moolman said,

“It is very possible that this could be the peak in the interest rate hiking cycle, and it could be that the Reserve Bank has scope late next year to start providing some interest rate relief.”

Future Forex CEO Harry Scherzer commented on the outlook:

“Much will depend on the trajectory of inflation, oil prices, the rand and global interest rates in the months ahead.”

All repayment figures and expert comments above are according to IOL.