*Aphelele, a single mother, was excited when she bought her first property in 2021 and took advantage of interest rates that had gone down to historical margins because of Covid-19.

The height of the Covid period saw the prime interest rate hit a multi-decade low of 7% and remained below 8% until May 2022. This attracted many first-time property buyers like Aphelele to enter the property market  because it had become less expensive to buy a house. According to Lightstone Property, a property data collecting firm, 153,302 homes were financed in 2020, 163,380 in 2021, and 152,406 in 2022.

In 2023, as interest rates began rising, the numbers of new bonds started decreasing, with 115,263 new homes being bought. , According to financial institutions, some of those first time property owners have started to feel the pinch in their pockets.

“I never thought I'd own a house and when Covid came it presented an opportunity for me,” said Aphelele, a 35-year-old IT specialist. 

“I bought a three-bedroom home for my child and my mother in Randburg, Johannesburg, for R1.2m with a monthly bond of R11,000 in 2020. Due to increasing repayments, I now pay R12,500, and it's difficult.  I have to adjust my finances which includes cutting down on luxuries such as going out with my friends. Last year I had to look for a cheaper school for my son,” said Aphelele.

According to Toni Anderson from Standard Bank in 2021 a customer taking up a R1m bond priced at prime paid a monthly instalment of R 7,903 and that amount has now gone up to R10,837 resulting in an increase of R2,933.

She said there are a variety of factors that can contribute to financial distress.

“Each individual faces different circumstances in this regard,  but affordability is a key aspect in this. Appropriate budgeting and planning for costs is critical.  Some of the tips include considering an appropriate budget to spend on a house. These may include planning for other costs that come with home ownership such as rates, taxes, levies and maintenance.

"Making additional payments into the bond when you are in stronger financial position is another option. Additionally, working with the bank to find the right solution if distress occurs is equally as important. Customers may think they have no way out, but the bank will try wherever possible to assist as best we can. Standard Bank’s priority remains to keep customers in their homes and have a positive impact on wealth for future generations,” she said. 

Nondumiso Ncapai from Absa Bank said at least 54% of new bonds it registered during the height of Covid were from first time home buyers and the bank has made several arrangements to help protect the financial position of distressed customers. 

These include payment arrangements to catch up with the arrears over a mutually agreed time and payment arrangements for customers to pay reduced amounts for a predetermined time while the consumer remediates their finances. 

“This has been significantly helpful given the more than 40% increase in instalments that has been experienced by some consumers over the past three years. We also offer payment arrangements to restructure the repayments of the loan over an extended term. This has been especially useful to consumers who had paid down their loans significantly and were in a position to spread out the remaining balance over an extended time, thereby reducing the monthly repayments. To be in this favourable position, the consumers would have made payments exceeding their required monthly instalments in the past." 

Ncapai said that for some consumers, these payment arrangements remain unaffordable.

"Consequently, they opt to sell their homes privately or through our bank-assisted sales, aiming to reduce their debt commitments and potentially downgrade to more affordable homes."

TIPS TO AVOID REPOSSESSION

• The best place to start is with a budget.
• Pay your monthly bills first and assess how much is left for the rest of the month.
• Pay extra amounts on your instalments as that would assist in reducing the balance faster while having the added benefit of reducing the interest burden,
• Talk to your bank when in financial difficulty and the earlier the customer engages the bank, the more options can be explored to cater for the customer’s specific circumstances.

*Not her real name