• Change of culture needed

    The right leadership will help SA shed its culture of violence, says Mandi Smallhorne.

  • 10 tips to find bargains

    Susan Erasmus gives advice on how bargain hunters can get the most bang for their buck.

  • Inside Labour

    Labour's bitter breaches need to be seen in historical context, says Terry Bell.

See More

Too late to fix home loan rate

Apr 25 2011 12:33 Elma Kloppers

Related Articles

First-time home buyers on the rise: FNB

Home owner 'wins' in top court ruling

Residential property plays catch-up

High-end houses harder to sell: FNB

Too old for a bond?

Weak house prices to persist: Absa

Johannesburg - It’s probably too late for homeowners to fix their home loan interest rates at a favourable level.

Property analysts agree: the best opportunity for a homeowner to get an attractive fixed mortgage rate is when interest rates are on the way down.

Interest rates are currently believed to have bottomed and they are expected to start rising later this year.

Fixing an interest rate means that a homeowner with a mortgage loan at his bank agrees to an interest rate that remains constant, despite interest-rate changes announced by the Reserve Bank. The fixed rate offered by banks will generally be higher than the prevailing rate. This fixing will also be valid only for a specified period, usually one or two years.

Jacques du Toit, senior property analyst at Absa Home Loans, said a favourable time to fix rates is when a small margin exists between the variable and the fixed rate. He said homeowners pay a premium for a fixed rate, which can vary from bank to bank.

Factors affecting rates include the consumer’s credit profile and his spending and saving patterns.

He said a fixed rate was therefore inappropriate for a consumer wanting to save money, as his monthly payment would be higher.

In South Africa a relatively small percentage of homeowners with mortgages fix their rates, largely because interest rates in this country tend to be very volatile.

First National Bank (FNB) property analyst John Loos said the purpose of a fixed rate was not to try to beat the market, but rather to have certainty about one’s future cash flow.

He said the decision whether or not to fix rates depended on a homeowner’s appetite for risk and his financial situation. For those without a financial cushion against economic shocks it could be beneficial to fixed rates.

But homeowners need to hurry because interest rates are expected to rise, meaning that a fixed rate becomes less and less attractive. Fixing an interest rate is venturing an economic forecast.

Erwin Rode, property valuer and economist at Rode & Associates, said that in principle it is not a good idea to fix mortgage rates because the likelihood of beating a bank's economist is less than 50%.

Then there is the practical problem of a homeowner having to pay a premium.

He said it is however important for a prospective home buyer to buy a house within his means, so that he has financial manoeuvrability in the event of interest rates starting to rise.

- Sake24.com

For business news in Afrikaans, go to www.sake24.com.

property  |  interest rates  |  houses



Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Add your comment
Comment 0 characters remaining

Company Snapshot

Brought to you by BizNews

More from BizNews

We're talking about:


Johannesburg has been selected to host the Global Entrepreneurship Congress in 2017. "[The congress] will ensure that small business development remains firmly on the national agenda and the radar screen of all stakeholders, the Small Business Development minister said.

Top 10 richest musicians of all time

Check out the gallery to find out who they are!


Luxury living

10 most expensive cars In the world
10 of the most expensive things that will leave your jaw hanging!
Seven of the most expensive children's toys ever made
5 millionaires turned murderers

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

How do you see your boss? He/sheis:

Previous results · Suggest a vote