Will this week’s interest rate hike be the last for homeowners this year?
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Homeowners will be hoping that interest rates stabilise from March. Picture: Antony Trivet/Pexels
It is pretty much guaranteed that homeowners will be paying more on their bonds from the end of this month; just how much more though, is unclear.
With predictions for this week’s repo rate hike ranging from 0.25% to 0.75%, it is probably safe to expect an increase of 0.5% – although, of course, we will only truly know once the announcement is made on Thursday afternoon.
The bigger question at this stage, though, is whether homeowners can expect a reprieve at the next repo rate announcement in March. Will the interest rate go up, or stay the same?
Some property and financial experts are, at this stage, expecting January’s hike to be the last this year, while others believe there will be another increase in two months’ time.
FNB senior economist Koketso Mano expects the upcoming increase to be the last in the current cycle. The Monetary Policy Committee will then evaluate the impact of monetary tightening since November 2021, he says.
Similarly, Carl Coetzee, chief executive at BetterBond recalls Reserve Bank Governor Lesetja Kganyago indicating in December that inflation was expected to slow. South Africa can then expect interest rates to normalise. Once the repo rate hits 7.5% – which it will do if this week’s increase is 0.5%, he feels the rate will stabilise, “with a likelihood of a gradual decrease towards the end of 2023 or in early 2024 depending on inflation”.
Paul Stevens, chief executive of Just Property, hopes that the total increase to the repo rate in 2023 will not exceed 1%. This indicates that he expects there to be another hike in March.
According to 43% of panelists on Finder.com’s SARB Repo Rate Forecast Report, January is likely to be the last increase in the current rate cycle, meaning that homeowners will not need to budget for higher home loan repayments after this month. However, 57% of the panel thinks the rate will increase again in March.
Either way, the panel does not believe South Africans will have to wait too long for a hold decision, with 72% forecasting a hold in May, and 94% a hold in July. Even further good news for bond holders is that 17% believe the repo rate could actually start decreasing as soon as September. However they might need to wait until 2024 as 50% of the panel forecast at least one rate decrease in the first half of the year and 67% in the second half of the year.
Financial professionals always advise homeowners and buyers to keep track of the interest rate cycle and take possible increases into account when budgeting.
To assist you with your end-of-the-month budget, IOL has drawn up the following table based on a range of home loan values and the three possible increases from the end of January.
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