Each time interest rates are raised half a percentage point, people say it’s small - but the reality is that the cost of borrowing at prime has gone up by 19% since June.
The prime rate has risen from 10,5% to 12,5% pa. Monthly payments on a bond financed at prime, have risen nearly 14% in six months. On a million rand bond, that comes to R1 377 a month.
In June, when prime was at 10,5% pa, the mortgage payments on an R1m bond were R9 984 a month. Following rate hikes of 50 basis points each in June, August, October and December, servicing and repaying such a bond now costs a borrower R11 361 a month.
Similarly for a R600 000 bond, payments increased R827 in six months to R6 817.
What was a bit worrying to me was the 73% of household income that goes towards paying debt. 73%!!!
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