By Bradd Bendall, Head of Sales at BetterBond
Consecutive months of interest rate hikes have raised questions about whether buying a home is a wise financial move, or whether it would be better to rent until interest rates stabilise. While buying a home does require a substantial financial outlay, it almost always makes sense to buy rather than rent. There are more benefits to contributing monthly towards an investment that appreciates in value, rather than paying a monthly rental on someone else’s investment.
It is important to remember that the interest rate is cyclical, and fluctuations are to be expected. This is why buyers should take rate fluctuations into consideration when budgeting to buy a home. BetterBond has online calculators that make it possible to work out how much a buyer can afford to pay each month, depending on the interest rate. Always consider buying at the lower end of the price range for which you would qualify for a bond, as this provides a buffer should the interest rate increase.
It is likely that the current rate hiking cycle that started in November 2021 is at its peak, and homeowners should start to feel some relief from next year as the interest rate starts to drop from its current 14-year high. This makes it an ideal time to invest in property, as those who can afford to buy now will benefit when the interest rate starts to drop. Working with a bond originator also makes buying a home more accessible.
BetterBond applies to multiple banks (including the client’s own bank) and negotiates the best interest rate on the buyer’s behalf. BetterBond’s average interest rate reduction when applying to four banks is currently 0.84%. On a R2-million bond, this monthly repayment at prime minus 0.84 percent – would result in a monthly saving of R1 153.
Some of the larger banks also offer bonds of 100%-plus, based on certain criteria such as first-time buyers and age. This also makes it possible for aspirant buyers to enter the market. Buying a home is a long-term investment in financial security. While the value of the property is likely to accumulate over time, the size of the loan will decrease with each monthly payment. If it’s possible to pay a bit more into the bond each month, this will also reduce the bond repayment period, as well as the interest owed.
For example, by paying R500 more each month on a bond for a R2-million home, it is possible to save R564 586 in interest over the loan period, and to reduce the 20 year loan repayment period by almost three years. However, someone renting a property, will continue paying the same amount each month (subject to inflation of course) without any return at the end of the rental period.
In addition to the financial security which property ownership provides, there is also the emotional peace-of-mind that comes with owning an asset that is yours, that will appreciate in value and that can become part of your family’s legacy.
Bradd Bendall has a strong background in sales and leadership roles. Bradd is currently serving as the Head of Sales at BetterBond since June 2022. Prior to that, he was self-employed for two months in 2022. From June 2020 to April 2022, Bradd worked as the Group Sales Director at Carrick Wealth, responsible for building strategic partnerships and expanding the company’s services. Bradd was the GM-Operations at Pam Golding Properties from March 2018 to May 2020.
Before that, Bradd held various positions at Ooba Group, including Head of Sales, Head of Group Franchising, Aggregation, and Acquisitions, and National Sales Manager. Bradd started his career as a Regional Sales Manager at African Life Assurance from May 2002 to March 2004.
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