The reserve bank increased interest rates by 75 basis points on Thursday last week. Prime is now at 9%. This means that your monthly instalments for your home loan, car loan, personal loans and all debts are going to increase accordingly. It is no surprise that many people are asking the question, should I fix my home loan rate?

There is no one answer that will suit everyone because we are all different, our levels of debts are different, we have different appetites for risk, etc…. In answering this question and deciding what you should be doing, I want you to be aware of the following and to ask yourself the following questions;

  1. Am I happy to pay more for my home loan from the moment I fix it? This is because when you fix your home loan rate, the bank is going to first increase the rate you are paying then fix it. I am aware of a bank that would fix your rate at a maximum of Prime +3%. So if you feel you must fix your rate, approach your bank and find out what rate they would be willing to offer you
  2. How long will my rate be fixed for? Banks offer different periods i.e. 6 months, 1 year, 18 months, 2 years, up to a maximum of 5 years
  3. What if I fix my rate and then interest rates start decreasing? Will I be happy to continue paying at a higher rate?
  4. Ask your bank what will happen at the end of the fixed rate period. Will your rate go back to what it was before you fixed it?

Other points to think about are;

  • What can I reduce at this point so I can cope with increasing repayments on my house, car, etc…
  • Am I budgeting monthly? Do I know how I am spending my money? If you are not budgeting, I suggest that you start doing so, this will help you to know how you are spending your money then you should be able to quickly identify areas where you can cut down

Whatever you do, please do NOT

  • Take a consolidation loan, it will simply make it harder for you to get out of debt
  • Do not borrow money from someone who is going to take your ID, bank card & PIN number
  • Do NOT cancel your life cover and funeral cover. What if you or someone you have covered dies? Rather contact us so we can see if we can’t help you reduce your monthly payments

Last but not least and most importantly, always pay more into your home loan and increase your repayments each time you get a salary increase, bonus, etc… This will help you to be always ahead with your repayments, reduce the interest and the term of loan. When interest rates increase, chances are you would find that you are already paying more than what is required anyway

If you are struggling with your debt repayments and you want advice on cutting out some of your debts so you can cope better, email info@thuthuka-sa.co.za Please note that we charge an upfront assessment fee of R500 to see if it is possible for you to get out debt quick