How interest rates affect your home loan payments

Buying a new home is exciting, but you need to stay rational throughout the journey, especially when you’re working out what affects your monthly payments or how much you’ll be paying in total on your home loan. Once you’ve calculated how much you can afford and if you can pay a deposit, you can start your house-hunting journey. When you find a property that you like and you’re ready to apply for a home loan, you ought to think about the interest rates applicable to home loans too.

Many factors are considered when your monthly home loan repayment is calculated, and the interest rate plays an important role. Most home loans are paid off over 20 years, so the interest rate can have a massive effect on the total amount you’ll be paying in that time.


What affects interest rates? 

Interest on loans is linked to the prime lending rate – that's why interest rates can sometimes be quoted as a certain percentage ‘above prime’ or ‘below prime’. The prime lending rate is determined by the repo rate.

The repo rate is the interest rate that the South African Reserve Bank (SARB) charges banks to borrow money, so it is included in the costs when you borrow money from the bank. SARB may change the repo rate in response to inflation or other economic factors, which will affect the interest rate on your bond and your monthly instalments.


Types of interest rates

Subject to certain conditions, you will be able to choose between variable and fixed interest rates on your home loan once your bond has been registered:

  • Variable interest rates are influenced by fluctuations in the repo rate, and are the standard interest-rate option on all new home loans.

  • Fixed interest rates do not fluctuate with the repo rate or prime lending rate. You can apply for a fixed interest rate only after your bond has been registered, and the fixed interest rate will be valid only for a designated period.

Your application for a fixed interest rate will be assessed according to your credit profile. A fixed interest rate is available only for a certain number of months, up to a maximum of 60.


Don’t forget that you’ll also have to pay transfer and bond costs when the bond is registered


When this period lapses, your home loan reverts to a variable interest rate. You can then apply to fix the rate again, but the new fixed interest rate will be calculated according to the repo rate at the time.

For more information on our fixed-rate options.


Compare your options before you apply for a bond

When you’re shopping around for a home loan, find a reputable lender to suit your specific needs and be realistic about what you can afford.

In addition to your first monthly payment, don’t forget that you’ll also have to pay transfer and bond costs when the bond is registered. You may be able to include these costs in the total loan amount that you apply for, but only if the monthly payments remain affordable. It helps if you have the budget or the savings to pay these costs upfront, without having to increase the size (and cost) of your home loan.

Our preapproval tool can help you determine how much you could qualify for while you’re still hunting for your dream house, townhouse, loft apartment or beachfront hideaway.

Explore how we can help you unlock the home loan you need today. Did you know that on average, Nedbank pays out around R1.8 million a month in cash back on home loans? In 2023, we paid out more than R20 million in cash back on home loans. For an affordable home loan tailored to your circumstances and value-added extras like up to R20,000 cash back and a 50% discount on your attorney bond registration fees, choose the bank that’s best for your money.