By Sifiso Sibandze
The Central Bank Governor Dr Phil Mnisi in consultation with the Monetary Policy Consultative Committee (MPCC) set to hike the bank rate today (Friday 30, 2022) as the inflationary risk outlook remains elevated coupled with the weaker Lilangeni and high oil prices.
Notably, interest rate increase has been exerting some financial strain on homeowners, resulting in many having difficulty keeping up with their home loan repayments and considering an involuntary sale. With another imminent sale later today, though many analysts predict it will be minimal (25 basis points, it may cause many emaSwati to struggle to keep their homes.
The higher interest rates exert more pressure on the already burdened households with debts and most of them will need to open space in their stressed budgets to cut down expenses so that they can afford the higher repayments.
According to the Central Bank of Eswatini’s Statistical Release, Credit extended to the private sector hit E17.4 billion at the end of January 2023, recording a month-on-month and year-on-year expansion of 0.6 per cent and 10.1 per cent, respectively. The growth was on account of all credit categories; credit to businesses, other sectors of the domestic economy, and households and non-profit institutions serving households (NPISH).
Credit extended to businesses improved by 1.0 per cent month-on-month and 19.8 per cent year-on-year to reach E8.6 billion at the end of January 2023.
Other property experts have observed that rising interest rates are eroding the prospects of potential homeowners, pushing a trend of longer-term rentals. On top of increasing interest rates, homeowners must deal with the typical costs of owning a property, such as insurance, rates and taxes, and maintenance, as well as a rising cost of living.
“When it is cheaper to rent rather than to buy, it would make sense – purely from a financial point of view to rent and religiously save the difference between rent and what the bond instalments would have been. After a few years of saving, a buyer could use the savings for a higher deposit to buy a home, which will by then probably be lower priced in real terms than now,” stated a property expert, Musa Nhleko of Mgilija Properties.
Nhleko further stated that oftentimes, some homeowners, who find themselves faced with the possibility of losing their homes, consider their options, including turning to their banks for assistance or selling.
Eswatini Bankers Association CEO Zakhele Lukhele earlier speaking to Eswatini Financial Times urged customers to always approach their institutions and discuss any problems of unpaid loans to seek and reach amicable solutions in time.
For homeowners in this difficult position, banks and property experts say there are ways to help them either keep their homes or at least retain their titles as homeowners by downscaling to a more affordable property.
According to Economist Thembinkosi Dube, there are several ways to survive tough times which include but are not limited to the following.
Banks want to keep people in their homes and so encourage homeowners to contact them when they see they are approaching financial difficulty. There are proactive measures to identify and assist customers who show signs of financial distress, irrespective of whether the customer has missed a payment or not.
Contact your banks or home loan providers as soon as you realise you are unable to make payment on your bonds. Talk to your bank about the various assistance plans for customers who are in distress.
All banks urge homeowners not to wait until the banks’ collections and recoveries team or department contacts them.
Enter into a new agreement
If homeowners find they are unable to pay the full instalment on their home loan, contact your home loan provider and inquire as to arrangements that could be made. Since each homeowner’s situation is different you must seek a unique way to move forward with the help of your financial institute. If you are experiencing short-term distress you may even be able to negotiate a lower repayment for a short time while you get back on your feet.
Consider selling before it is too late
If none of the bank’s options is suitable, homeowners whose accounts are up to date could sell their properties privately or with the assistance of an estate agent. Experts advise you to speak to an experienced agent and get your house on the market. An agent will do their best to get you the best price for your home.
Debt-proof your home (those considering buying now)
Before you get to a stage of being pressured here are some ways to upfront help yourself before you buy a home: * Pay a larger deposit: Making a bigger down payment will mean buyers will need a smaller home loan and can negotiate for better rates as they’re negotiating from a stronger position.
- Secure a lower interest rate: When applying for a home loan it’s generally a good idea to shop around to see what the different banks offer – negotiating a low-interest rate (when possible) can do much to decrease costs on a month-by-month basis.
- Pay a little extra each month: The more money you can pay into your home loan every month, the better. This can help reduce your loan term and help you pay off your home loan more quicker. Even R500 extra a month can make a big difference. Homeowners can also consider making some extra money from their homes by renting out any extra space, agents say.
Consider downsizing or alternative ways of living
If you have more than one property consider selling one of them. Or you could find a smaller home in a cheaper neighbourhood and downsize. You could even rent for a while, or move in with family or friends until you get on your feet. It is not the end of the road. Many people have made the move to alternative ways of living even including mobile homes and shared accommodation and have done so successfully.