[imagesource: Pix4Free / Creative Commons Licence]

Does anyone else see that photo people are so fond of posting on Facebook, standing outside their new house with a key in their hand, and wonder how they afford it?

I know you’re a single-income house, Doris (not their real name, because nobody is called Doris these days), and Cape Town property prices are out of control. My guess is it’s one of two things – somebody has been given a sizeable loan from the parent bank or someone has taken out a sizeable home loan, which requires proof that you’re able to pay it back.

My gut says it’s the first one.

Either way, welcome to home ownership and good luck keeping up with your monthly repayments, especially in light of yesterday’s announcement, reports Moneyweb:

The central bank delivered its final monetary policy statement of the year on Thursday, hiking the repo rate by a widely expected 75 basis points (bps) to 7% – pushing it to above pre-pandemic levels.

…the prime lending rate – the rate at which commercial banks lend to consumers – has risen from 7.25% to 10.5%.

That might not sound like much. In terms of what you owe each month, it does leave a mark.

Consider how things have changed since January:

Image: Moneyweb

Scaling down to car financing, Monyweb gives the example of a car bought for R430 000 and financed over 72 months at a prime rate plus 2%. You were paying R7 804 at the start of the year and now it’s an added R715.

Your car is also worth far, far less. Terrible investment.

Another comparison of the difference between a year ago and now to illustrate that shift:

spare a thought for all folks who BARELY squeezed through the bank qualification for a home loan when interest rates were low… absolutely brutal right now

— Don Petty Cash (@iamkoshiek) November 24, 2022

People never really talk about this when they sell their house and think they’ve made a profit.

Buying a house for R2 million and paying your bond over 20 years makes the actual purchasing price far, far higher.

BusinessTech also has a table showing the difference in bond repayments between September and now:

Image: BusinessTech

It all adds up.

Just because you can get approved for a bond doesn’t mean you can pay it off.

Fall short on those payments and bang, the bank scores itself a house.

[sources:moneyweb&bustech]