Don't panic - the bank would rather not repossess your home

For homeowners, the actual effect of the 3,5 percentage point rise in the home loan interest rate since November 2021 is an increase of more than 28% in their minimum monthly home loan repayments - and there are fears that home repossession numbers could soon start to rise as a result.

However, says Gerhard Kotzé, MD of the RealNet national estate agency group, foreclosure and repossession can often be avoided if homeowners who are experiencing financial difficulties refuse to panic.

"The first thing they need to realise is that banks really don't want to repossess people's homes. They would much rather try to keep homeowners in place than have to cover all the legal costs of repossession and the costs of securing and maintaining an empty home, while also incurring the total loss of repayments on the loan for several months or possibly even years."

In addition, he says, homeowners need to stop worrying about talking to their banks if they are having financial difficulties. "The banks are well aware that rising inflation has pushed up all the costs of running a household at the same time as rising interest rates have increased the repayments due on cars, furniture and credit-card debt as well as home loans.

"They also know that things might get even worse if there are further big rate and price hikes this year and salary increases fail to keep pace. And there are various ways in which they can and will help if borrowers who are in financial trouble communicate that they are willing to make whatever arrangements might be necessary to hang on to their homes."

In some cases, Kotzé says, homeowners may be able to show that their cash-crunch is only temporary and ask the bank for leniency until they receive an expected raise or commission, for example, or until they pay off another debt and can put more money towards their home loan repayments.

"Homeowners who have other assets such as a second vehicle, shares or a holiday home may also be able to sell these and pay the cash raised into their home loan account to reduce the principal debt and the minimum monthly repayment.

"And it is worth making almost any sacrifice to keep your primary residence. However, if you really can't make ends meet and see no prospect of doing so, most large lenders will assist you to join their distressed seller programme and give you time and access to professional help to sell your home on the open market and pay off your home loan."

This may not seem like a great outcome, he says, but it does have two very important advantages over repossession: It allows you to walk away with your credit record intact, and it enables you to buy or rent another, less expensive home in which to live until your cash flow situation improves or interest rates come down again.