Cape Town - South African Home Loans (SAHL), the country's first non-bank, discount mortgage provider, has launched another
first into the home loan market - a 20-year fixed rate home loan, the company said on Thursday.
Detailing its new offering, SAHL said VariFix was a unique innovation to the local market due to a number of pioneering features.
Most significantly, homeowners could now fix their rates for the full life of the loan - resulting in no interest rate increases over a period of 20 years.
The second unique benefit of the new product was that clients could choose to tailor their loan to their own specific needs.
A portion of the loan could be at a variable rate, while the balance was at a fixed rate for the full 20 years.
Up to 100% of the bond could be fixed.
A further distinctive feature was that, while the loan was fixed against upward rates movements, the bondholder would still benefit if interest rates went down.
Where rates did fall, the fixed rate would drop down to the same level, and would not go up again if interest rates subsequently increase.
SAHL CEO Kevin Penwarden said: "In the last 20 years, we have seen extreme volatility in interest rates, with prime lending rates having only been below 12% for a period of 18 months during that time.
"We now have interest rates at their lowest in 20 years,
which SAHL believes is exactly the right time to offer South Africans long-term peace of mind through fixing their home loan."
Current indications were that the rate for the fixed portion would be in the region of 12%, which included SAHL's current discount margin of 2.1%.
The funding rate is derived from the market's view of long-term interest rates.
The variable portion is set at the rate of Johannesburg Interbank Acceptance Rate (JIBAR-the interest rate banks charge each other), again plus SAHL's margin of 2.1% (for qualifying clients).
Currently this equates to 9.1%. The minimum loan amount for the VariFix product is R200 000, with the minimum fixed loan portion being R50 000.
Penwarden said: "This new product is another example of SA Home Loans' innovation and focus on being the champion of consumers and continuing to challenge the banking sector to deliver better service to homeowners.
In 2001, SAHL pioneered new methods of funding and distribution of mortgages and launched the successful use of securitisation to generate funding.
During the last year, SAHL also launched several complimentary products to its home loans.
These included life insurance, a credit card, capped loans
and quick cash advances.
Take-up on all these products had been extremely
positive, concluded Penwarden.