South Africa’s prime lending rate is 9.75% as of September 2022. It was raised by 0.25% in November 2021 and again in January 2022.
Lending Rates in South Africa
In South Africa, the lending rate is the prime overdraft rate of a commercial bank. It is a benchmark rate priced 3.5 basis points above the repurchase rate, and banks use it to price loan rates supplied to clients above or below the benchmark rate.
This increase comes after a series of interest rate decreases in 2020, which pushed the interest rate to its lowest level in decades.
These measures were meant to keep the housing market afloat during the difficult Covid shutdown time. The increases in November and January indicate that the South African Reserve Bank is aiming to compensate for growing inflation. More rate increases are expected in 2022.
What does this mean for mortgages?
To put this in context, an R1 000 000 home loan with a duration of 20 years and a R100 000 deposit would have cost you R1 674 646, with monthly installments of R6 978 before the interest rate hikes.
Following the interest rate increases, the same property loan would cost R1 740 081 (a R65 435 difference), with monthly payments of R7 250.
Other factors influencing interest rates
Your financial status, in addition to the prime interest rate, will influence the interest rate that the bank charges on your house loan.
Your credit history
The most important element is your credit history, which is influenced by factors such as your level of debt and how promptly you pay your obligations. Anything above 670 is considered great credit and will likely result in cheaper borrowing rates.
Your down payment
Your interest rates will also be affected by the size of your deposit. The bigger the deposit, the lower the bank’s risk, and hence cheaper monthly repayments and interest rates.
What is South Africa’s prime lending rate in 2022?
South Africa’s prime lending rate is 7.75% as of April 2022.
Will interest rates in South Africa rise in 2022?
FNB anticipates more raises in 2022, with each hike raising the repo rate by 0.25%. BNP Paribas South Africa’s spokesperson forecast even greater rises of 0.50%.
