Peak of rates cycle is a golden opportunity for first time buyers

Published August 2024

Buying your first home is a momentous decision and one that requires considerable financial planning. This is why the forecast that the repo rate is likely to hold steady, before coming down, presents an ideal opportunity for buyers to plan ahead and budget properly before applying for a bond.

Although buying a home is a substantial investment, there are many options available to first-time buyers wanting to take the plunge during the peak of the rates cycle.

First home finance

First-time buyers with a household income of between R3,501 and R22,000 may qualify for a once-off housing subsidy called First Home Finance, if they meet the criteria. It’s now possible to get the subsidy without first securing a bond. This makes it even easier for qualifying applicants to own a home. You can use other sources of finance, such as an unsecured loan or employer-assisted housing scheme, to buy your home.

A helping hand from the bank

While it’s always advisable to put down a deposit – even if it’s only 10% of the home’s value – when applying for a bond, first-time buyers often don’t have the financial means to do so. South Africa’s main banks offer a range of loan products that include loans of as much as 110% for young professionals under the age of 30. A loan of 100% or more makes it possible to buy a home without having a deposit. It could also cover the hefty transfer and bond registration fees that you must pay upfront.

Below the threshold

Another way of making home ownership a reality is buying below the R1.1 million threshold. There are no transfer duties payable for homes of below R1.1 million – a considerable saving for a new buyer. First-time buyers should also consider a new development when looking for an investment. No transfer duty costs are payable if your home is a new build, although you will still need to pay transfer costs to the conveyancing attorney. Aside from the initial costs, buying in a new development will also save you money on repairs and maintenance for the first few years.

Buy smarter

As a home is a substantial purchase. It’s advisable for first-time buyers to know what they can afford before they start house hunting. Obtain pre-approval from a bond originator so that you have a clear idea of what you can afford. Pre-approval also improves your chances of securing a bond. With BetterBond, 95% of customers who pre-approve are approved by one or more banks.  

A bond originator will apply to more than one bank on your behalf to secure a lower interest rate. This is called a rate concession. Currently BetterBond’s average interest rate concession when applying to four banks is 0.61%. This means that the interest payable on your bond will be 0.61% below what the banks initially offer you.