How much is that rate concession actually worth?

SA home buyers need to become more aware of the advantages of being offered a lower interest rate when they are initially approved for a home loan, says Rudi Botha, CEO of BetterBond, SA's leading bond originator*.

"As consumers, we're mostly aware of what happens when the Reserve Bank raises or lowers interest rates and how that will affect us in terms of our monthly repayments on our debts like car finance and credit card balances as well as home loans.

"Generally, we are all also aware of the need to cut expenses wherever possible in order to cope with the rising cost of living, especially given the VAT, fuel and municipal increases that have taken place this year. But among prospective borrowers, we are finding that there is not enough awareness of the really substantial savings to be made by securing a new bond at a lower rate from the outset."

For example, he says, a 0,5% rate concession on a new R1m home loan will immediately reduce the minimum monthly bond repayment due by some R330 a month - and automatically generate an annual saving of almost R4000 - without the borrower having to do anything.

"In addition to this, it would cut R80 000 off the total amount of interest due over the 20-year life of the bond - again without the borrower being required to take any further action - and if you were to offer consumers similar savings on their cell phone bills, for example, or on the eventual cost of their car, we have no doubt they would be queueing up for the opportunity.

"We have also seen the insurance companies get very good at making consumers aware of how much they could potentially save by comparing various short-term insurance offerings. But we don't see the banks advertising competitive rates for home loans in the same way, and in fact most home buyers still seem to have the impression that they are 'lucky' to be approved for a bond at all, on whatever terms the lender chooses to offer them."

However, says Botha, that is patently not true. "Despite the turbulent economic conditions, BetterBond is currently able to secure approval for more than 80% of the bond applications it submits, which just goes to show how keen the banks are at the moment to lend to home buyers. Indeed, we have not experienced this consistent rate of approval since before the global financial crisis of 2008/09.

"What is more, our multiple bank approval process ensures that we are able to offer every applicant the lowest interest rate available to them from a range of options. And since the variance in the rates and rate concessions offered averages around 0,5%, the majority of our clients are able to access significant savings opportunities as outlined above.

"This is a compelling reason for home buyers to always enlist the help of a bond originator like BetterBond when applying for a home loan rather than trying other means, especially since our service is free to potential borrowers."

*BetterBond is our preferred mortgage originator. Its statistics represent 25% of all residential bonds being registered in the Deeds Office and are thus a reliable indicator of the state of South Africa's residential property market.