A rate rise of half a point would add R336 a month to a R1m home loan
eNCA's numbers segment worked through what a move to 10,75% means for a bondholder, and settled on a figure small enough to be missed and large enough to be felt.
A half-point rise in the interest rate would add R336 a month to the repayment on a R1 million home loan. That is the gap between what a bondholder paid in April and what the same loan would cost once the rate moves from 10,25% to 10,75%, worked through on eNCA’s Number Of The Day segment.
The segment, published on 21 September, used the standard home loan calculators and a round R1 million bond to keep the arithmetic legible. On that basis, the monthly instalment sat at R9 816 before May at 10,25%. It rose when the rate first moved. At 10,75% it comes to R10 152.
The presenter was explicit that the figure is an illustration rather than a quotation. The calculation assumes no deposit and none of the other costs that attach to a real bond, so an actual borrower’s instalment will differ.
What the number does show is the direction and the size of the squeeze. R336 is not a large sum in isolation. On the segment it was described in the terms households actually use: roughly a quarter of a tank of fuel, some of the month’s groceries that would have to go unbought, a night out that no longer happens, or money that would have gone into savings.
The effect scales with the loan. A more expensive house carries a bigger instalment and therefore a bigger increase, and the segment noted that consumers are already under pressure from fuel and other rising costs. Companies have been saying the same thing about their customers for some time.
The calculation is a planning tool rather than a forecast. Whether the rate moves, and by how much, is a decision for the Reserve Bank’s Monetary Policy Committee, which sets the repo rate at its scheduled meetings and announces the outcome. Borrowers can run the same arithmetic on their own outstanding balance using the calculators the segment used, and the difference between the April instalment and the projected one is the figure to watch for.
Source: eNCA (YouTube), Number Of The Day | The Extra R336 Squeezing Household Budgets
