Interest rate: R5 million bond, no deposit now costs R54 185 per month!

The SARB Monetary Policy Committee has voted to hike interest rates by 50 basis points, dealing yet another blow to South Africans in debt.

The South African Reserve Bank’s (SARB) Monetary Policy Committee (MPC) voted to hike interest rates by 50 basis points on Thursday, dealing yet another devastating blow to South Africans in debt.

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That decision took the country’s repurchase rate to 8.25% while the prime lending rate rose to 11.75%.

The changes will come into effect from Friday, 26 May 2023.

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The latest interest rate hike marks the 11th in the current cycle, with the total adjustment being a massive 475 basis points since the hike cycle started in November 2021.

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According to Reserve Bank governor Lesetja Kganyago, the vote was unanimous, with all five members voting for a 50 basis point hike.

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WHAT DOES THE INCREASE MEAN FOR THOSE WITH MONTHLY BOND REPAYMENTS?

On a home loan of R1 million at the new prime rate (11.75%), the latest hike will increase payments by R344 a month, while a R2 million bond outstanding with now cost R689 more each month.

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Those with a R5 million bond with no deposit paying off the bond over a 20 year (240 month) period at prime of 11.75% will now pay R54 185 per month.

The total amount repayable is a staggering R13 004 400.

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The table below shows both ‘old’ and ‘new’ monthly bond repayments on various bond values assuming no deposit and that repayments are at prime:

repayments are at prime: