In a new development in the race between banks to offer attractive home loan options, Absa Bank this week launched a new fixed interest rate.
You can opt to lock in your interest rate for 12 months or 24 months and the rate you qualify for depends on the size of your loan.
If you have a loan less than R400 000, you pay an interest rate of 16,9 percent for 12 months and if you lock in for 24 months, you pay 16,8 percent.
For loans over R400 000, you can get an interest rate of 16,75 percent over 12 months and 16,7 percent over 24 months.
You sign a contract when you get a fixed rate and you can be charged a penalty of one percent on the outstanding balance of the loan if you want out before the end of the agreed term.
Other banks also offer fixed rates but Absa's are the lowest on the market at the moment.
The decision on whether to go for a fixed rate or to continue paying a variable interest rate is entirely yours and depends on your view of where interest rates are going.
Bear in mind predictions that prime interest rates could decrease to anything between 16 and 18 percent by the end of the year and that some commentators even expect the prime rate to be lower than this.
The base home loan rate is usually one percent lower than the prime rate, which means the home loan rate could be between 15 percent and 17 percent by the end of the year.
Also, you may qualify for a preferential interest rate on your home loan of up to one percent, which means you could be paying about 15 percent by the end of this year if you stick with the variable rate.
The major advantage of locking into a fixed rate is that you can budget properly, because you know exactly what you will be spending on loan repayments for a fixed period of time.