Shop around if you are seriously considering fixing your interest rate, because the variation between banks is wide, reflecting the range of outlooks on where interest rates are headed.
Absa, Nedbank and SA Home Loans (SAHL) report a low demand for fixed interest rates, whereas Standard Bank says there has been a “huge take-up” of a fixed rate over 24 months.
Absa, which has the largest number of home loans in the market, offers clients fixed rates over 12 or 24 months.
Gavin Opperman, the chief executive of Absa Retail Bank, says the fixed rate for which you qualify will be determined by the loan balance in relation to the property value and risk.
Currently, Absa offers rates of between nine and 10.9 percent if you fix for 12 months, and between 9.1 and 11.3 percent if you fix for 24 months.
“In general, fixed rates find favour with the market whenever the interest rate cycle starts to rise. When interest rates start to fall, fixed rates become unattractive. Currently, sales of fixed rates are low,” Opperman says.
Nedbank has also noted a low demand for fixed rates, Pat Lamont, the bank’s general manager of home loans, says.
Nedbank offers its clients fixed interest rates over 12, 24, 36, 48 or 60 months.
The bank charges a premium above the client’s variable rate. “Currently, the three-year fixed rate premium is approximately one percent,” Lamont says.
SAHL is not offering a fixed rate option, Kevin Penwarden, the mortgage finance provider’s chief executive, says.
“At SAHL, we are not seeing much demand for fixed rates, so we are currently not offering a product in this space,” he says.
First National Bank (FNB) offers a fixed rate over a five-year term only. Marius Marais, the chief executive of housing finance at FNB, says the fixed rate is one percentage point above the client’s variable rate.
“On certain loans we offer a fixed rate as the only option. This is where people don’t have a minimum buffer on the variable rate. We check the buffer in our affordability analysis.
“Where we do offer both the variable and fixed rate options, we have a higher take-up of variable. In South Africa, we essentially still have a market psyche of variable rates,” Marais says.
At Standard Bank, fixed interest rates are available over 12, 18, 24 or 36 months.
The bank cannot provide an indication of the rates on offer, because it cannot guarantee that the funding is available at a specific rate, Funeka Ntombela, the head of home loans at Standard Bank, says.
“Fixed rate offerings are directly linked to the availability of funding provided by investors on the global financial markets. When a bank requests long-term fixed rate funding from the market, investors will expect a greater return on their investment. In most cases, the longer the term, the higher the fixed-rate pricing.
“At the moment, the best selling rate is 24 months, due to customer demand and attractive pricing,” Ntombela says.
There has been a “huge take-up” of fixed rates over this term, she says.