A succession of hikes has seen the interest rate reach a 15-year high, but things are expected to change in the near future. Find out more.
Article summary
- In September 2023, the South African Reserve Bank left the interest rate unchanged, which experts predict will be the trend for 2024.
- Experts were initially predicting interest rate drops but concerns over inflation have tempered those expectations.
- The hope is that the US will begin to drop interest rates in September 2024, which will influence the South African market.
South African interest rates have been at a 15-year high for the past year, as the South African Reserve Bank introduced several rate hikes to compensate for inflation.
However, things began to look positive in September 2023 when the SARB opted to leave the interest rate the same.
This decision was repeated in early 2024. As such, as of April 2024, the interest rate remains at its May 2023 level of 11.75%.
Note: There may be uncertainty regarding interest rates, but there doesn’t have to be uncertainty regarding your bond payments. Use our Bond Repayment Calculator and you can determine what you will owe on bond repayments per month, enabling you to budget accordingly.
What experts say about 2024 interest rates
The consensus is that interest rate hikes are unlikely for the time being.
According to Stonehage Fleming senior analyst Jan-Daan van Wyk:
“We believe the SARB will maintain the repo rate at its current restrictive level of 8.25% until after the South African national elections have been held, the Fed has started cutting US interest rates, and some of the fiscal pressures have eased domestically.”
However, initial positivity regarding potential interest rate drops has taken a turn as inflation appears to be a major factor.
In early 2024, experts were predicting that SARB would begin to lower interest rates later in the year, perhaps even as early as May 2024.
Reserve Bank governor Lesetja Kganyago has made it clear interest rates will not be lowered until inflation begins to drop.
According to Investec economist Lara Hodes:
“The SARB has conveyed its determination to see CPI inflation reach 4.5%, the mid-point of the inflation target range this year; however, risks to the inflation outcome remain to the upside.”
Investec chief economist Annabel Bishop says that interest rate predictions were based on expectations for the US market. The probability for US interest rate cuts dropped 50% due to inflation concerns.
“The core PCE deflator is the key inflation measure US monetary policy officials watch in their implicit inflation targeting. The PCE deflator measure rose to 2.5% y/y from 2.4% y/y in January, also not inspiring market confidence,” said Bishop.
Are any cuts still expected?
According to Bishop, an interest rate cut in September 2024 is likely. Later than expected, but still encouraging.
What does this mean for homebuyers?
It’s still a good time to invest, as the interest rate is likely to remain unchanged, and South Africa is still a buyer’s market.
Inflation combined with an expected delay in interest rate hikes may be discouraging to buyers, but housing supply still outstrips demand and competition between banks is strong, improving the chances of obtaining home loan approval.
How can buyers give themselves the best chance?
With the market being so volatile, it helps to have a solid estimate of the home loan you’ll be able to afford, which you can obtain by getting prequalified with ooba Home Loans.
Prequalification will assess your financial situation (including your credit record, the most important factor) and calculate the home loan you qualify for. This will serve as proof to the bank that you qualify for that home loan amount.
You can get prequalified by contacting an expert at ooba Home Loans or by using our free, online prequalification tool, the Bond Indicator.
FAQs
Elevated mortgage rates continue to drag on the housing market well into 2024. There's a shortage of homes for sale, with many homeowners opting to stay put and keep the historically low interest rates they secured in 2020 and 2021, when rates averaged 3.20% and 3.06%, respectively.
What is the prediction for the interest rates for a house? ›
Mortgage rate predictions for 2024
| Housing Authority | 30-Year Mortgage Rate Forecast (Q2 2024) |
|---|
| Mortgage Bankers Association | 6.70% |
| Wells Fargo | 7.05% |
| National Association of Realtors | 7.10% |
| Average Prediction | 6.85% |
2 more rows5 days ago
But until the Fed sees evidence of slowing economic growth, interest rates will stay higher for longer. The 30-year fixed mortgage rate is expected to fall to the mid-6% range through the end of 2024, potentially dipping into high-5% territory by the end of 2025.
What is the interest rate predictions? ›
Financial markets are currently predicting the first cut in interest rates will be in June or August 2024. As a general rule: if interest rates fall, the mortgage rate forecast would be for mortgage rates to fall too. But any cuts in interest rates depend on factors such as what happens with inflation.
Should I worry about interest rates when buying a house? ›
Higher Monthly Mortgage Payment
The higher your interest rate, the more your monthly payment will be. Even small changes to your interest rate can have a big impact on how much you pay the bank over the course of your loan. The team at Ramsey Solutions highlighted how changing interest rates can impact home loan costs.
What is considered a really good mortgage rate? ›
In today's market, a good mortgage interest rate can fall in the high-6% range, depending on several factors, such as the type of mortgage, loan term, and individual financial circ*mstances. To understand what a favorable mortgage rate looks like for you, get quotes from a few different lenders and compare them.
Will house interest rates go down in 2024? ›
The good news: With the U.S. Federal Reserve widely expected to begin cutting its benchmark interest rate in 2024, mortgage rates could drop as well—at least slightly. But that doesn't necessarily mean a return to the pre-pandemic era of more affordable mortgages and home prices.
What will home mortgage rates be in 2025? ›
Here's where three experts predict mortgage rates are heading: Around 6% or below by Q1 2025: "Rates hit 8% towards the end of last year, and right now we are seeing rates closer to 6.875%," says Haymore. "By the first quarter of 2025, mortgage rates could potentially fall below the 6% threshold, or maybe even lower."
What is the interest rate today? ›
Current mortgage and refinance rates
| Product | Interest Rate | APR |
|---|
| 30-year fixed-rate | 6.963% | 7.036% |
| 20-year fixed-rate | 6.688% | 6.786% |
| 15-year fixed-rate | 6.094% | 6.215% |
| 10-year fixed-rate | 5.942% | 6.121% |
5 more rowsLawrence Yun, chief economist at the National Association of Realtors, even told CNBC that he doesn't think mortgage rates will reach the 3% range again in his lifetime.
No, when interest rates rise, not everyone suffers. people who need to borrow funds for any purpose are negatively because financing costs more; conversely, savers earn profit because they can earn greater interest rates on their savings.
Where will mortgage rates be in 5 years? ›
Most forecasting models predict that mortgage rates will remain above 6% in 2024, potentially dropping further in 2025. Whether or not the Federal Reserve loosens its monetary policy will play a significant role in determining the direction of interest rates.
Will the mortgage rates go down? ›
'Lower interest rates would likely result in further modest declines in mortgage rates but how far depends on how low money markets see base rates falling. 'Economists currently expect base rates to fall to 3.5% by the end of 2025, which would imply mortgage rates remaining in and around the 4%+ range.'
What is the projection for mortgage rates? ›
We now forecast the 30-year fixed rate mortgage rate to average 6.6% in 2024, and to average 6.1% in 2025.” National Association of Realtors chief economist Lawrence Yun. “The budget deficit remains high, and the various inflation metrics remain above the comfort level.
Should I fix my mortgage rate for 5 years? ›
If you're looking for certainty and peace of mind, a 5-year fixed rate mortgage may be the right choice for you. With a longer fixed term, you'll have predictable repayments for a longer period, protecting yourself against any potential interest rate rises.
Are mortgage rates really high right now? ›
Today's national mortgage interest rate trends
On Monday, June 03, 2024, the current average interest rate for a 30-year fixed mortgage is 7.17%, rising 13 basis points over the last week.
Should I fix the interest rate on my mortgage? ›
Whether you choose to fix or vary will ultimately come down to several things such as: The value you place on stability and predictability. Whether you think you'll want to increase your monthly repayments at some stage in the near future.
Can you ask for a better mortgage rate? ›
Each lender will offer somewhat different rates on the same type of loan. Even a couple of percentage points can make a big difference in how high your money payment will be, so be sure to ask around. Negotiate mortgage rate and fees with desired lender.
Why is my mortgage interest rate so high? ›
Mortgage rates are affected by market factors like inflation, the cost of borrowing, bond yields and risk. Mortgage rates are also affected by personal financial factors, such as your down payment, income, assets and credit history.
